Twitter reports earnings on Thursday.
Alastair Pike / AFP via Getty Images
When Twitter reports first-quarter earnings on Thursday, investors will be looking for signs that the company has begun to implement the vision CEO Jack Dorsey and other executives laid out a few months ago.
Back in February, Twitter was hosting its first analyst day in years, and issued a bold promise at the event: to double annual revenue to $7.5 billion by 2023 from the $3.7 billion it reported last year.
Wall Street is expecting its first quarter to be better than usual, as consensus estimates call for adjusted earnings of 14 cents a share on revenue of $1.03 billion. In typical years, first-quarter sales for Twitter—and many other online ad companies—aren’t as lofty as those during the holiday quarter, when advertisers spend big. GAAP losses are expected to be 2 cents a share.
To achieve Twitter’s lofty revenue target, executives will need to diversify the company’s advertising revenue to include a greater amount of so-called direct response ads, according to Canaccord analyst Maria Ripps. Direct response ads usually involve a user taking a trackable action, such as making a purchase or signing up for an email list, which advertisers can use to closely monitor the return on ad dollars spent. Investors can expect an update on progress on this front during the call.
Ripps wrote in a client note that executives Thursday will also likely issue an update on how its mobile app promotion capabilities have improved, another way of broadening its ad business. Advertising revenue is expected to be $897 million for the first quarter.
Twitter has long promised to make more money from its data licensing business. At the February analyst day, Twitter said it planned new revenue streams such as subscriber-only newsletters, paid premium features such as TweetDeck, and advanced analytics. Twitter is expected to report first-quarter data licensing and other revenue of $135.3 million.
Audio applications have been buzzing in Silicon Valley recently, as a “drop-in audio” app called Clubhouse gained popularity during the Covid-19 pandemic. Facebook has announced its own version, and Twitter has too. Executives will talk about Twitter’s vision for its features—but it’s far from certain whether these types of audio apps will be attractive to consumers, as the coronavirus pandemic’s tight grip on people’s lives lessens.
The plans from the investor day call for Twitter expanding its daily user count to 315 million by the fourth-quarter of 2023. For the first quarter, analysts are looking for what Twitter calls monetizable daily active users of 198.8 million, a modest tick up from the 192 million it boasted at the end of last year.
Of the analysts that cover Twitter stock, 28% rate it a Buy, 60% have a Hold rating, and five analysts call it a Sell. The average target price is $72, which implies an upside of 9.1%.
Shares of the social network more than doubled in the past year to $66.28 as of late afternoon trading Wednesday. The S&P 500 index advanced 46% in the same period.
Twitter is expected to report results after the closing bell Thursday, and is set to hold a conference call at 6 p.m. ET.
Write to Max A. Cherney at [email protected]
