Reports Q4 2020 results on Tuesday February 9, after the close
Revenue Forecast: $ 1.18 Billion
EPS Expectation: $ 0.2926
Despite all the wild ups and downs of the past year, Twitter (NYSE 🙂 remains one of the most favored social media stocks for investors due to its growing user base and improved monetization capabilities.
Shares of Twitter, which traded for $ 56.78 at Friday's close, have more than doubled since the March dip, adding 30% in value in the past three months. During that period, Facebook shares (NASDAQ 🙂 barely entered.
Behind this resilience lies analyst expectations that the microblogging app is well positioned to add more subscribers, grow sales and improve bottom line. When Twitter releases its fourth-quarter earnings report on Tuesday after the market closed, analysts expect revenue to jump 20% to $ 1.18 billion and earnings per share from $ 0.19 to $ 0.29.
In a January 28th research note to customers, KeyBanc analysts upgraded Twitter's rating to Overweight, as they expect both revenue and user growth to continue to improve. They wrote:
"We believe execution is improving, and the combination of a cyclical ad recovery and new products creates a potential for revenues in excess of our expected 2021 and 2022 revenues that are above consensus."
KeyBank expects Twitter revenues to increase by more than 20% annually.
Banning Trump
Earlier, JP Morgan analyst Doug Anmuth also issued a bullish call on Twitter, raising his price target from $ 52 per share to $ 65, saying he believes Twitter's business momentum will improve after 2020.
"We believe Twitter is uniquely positioned as the real-time broadcast and communications network, making it complementary to all other forms of media, including TV," said Anmuth. In addition, Twitter is likely to benefit from the shift to mobile. and video, as the ad product and platform keep getting better, he added.
Still, even with these bullish calls, it is also a challenging time for the San Francisco-based company, after it has permanently banned former US President Donald Trump from his platform after allegedly instigating a deadly attack on Capitol Hill to protest the election results.
The controversial move angered millions of Trump supporters, causing some business implications for Twitter due to its relatively small user base compared to other social media giants. Trump & # 39; s account had approximately 90 million followers. That's comparable to the 187 million average daily active users Twitter reported in the most recent quarter.
Bottom Line
Twitter's stock is very vulnerable to negative earnings surprises. Shares fell 21% after the company reported fewer subscribers than analysts expected in November. That said, the stock has been performing well since the pandemic outbreak and is well positioned to attract digital advertising dollars.
We think Twitter has gained solid momentum in transforming its platform into one that advertisers increasingly value. Any weakness after the win should be a buying opportunity for those looking for a good entry point.
