The social media giant Twitter, Inc. is expected to report earnings for the fiscal quarter ending December 2021 on Thursday, February 10, 2022 before the market opens. This will be the first revenue call for new CEO Parag Agrawal, whose plans to boost user growth and revitalize content with machine learning will be the focus. From earlier earnings calls, management reaffirmed its goal of generating $7.5 billion or more in annual revenue by 2023, which may seem questionable at this point, given that the last twelve months (LTM) revenue was $4.8 billion and iOS updates from Apple will be the headwind for future advertising price growth. Parag Agrawal replaced Jack Dorsey, who resigned in November last year, because he believed that a company led by its founder would severely limit the company and become a point of failure.
According to Zacks Investment Research, based on 7 analyst forecasts, the consensus EPS forecast for the quarter is $0.33, reflecting a 13.16% year-on-year decline. The reported EPS for the same quarter last year was $0.38. In its most recent earnings report, Twitter reported earnings of -$0.54 per share, missing Zacks’ consensus estimate of $0.17 per share. This reflects a negative earnings surprise of 417.65%. The stock price is projected at rank 5 (strong sell).
Twitter expects revenue of about $1.5 billion to $1.6 billion in the fourth quarter of 2021, a growth of more than 21%. GAAP operating revenue is expected to range from $130 million to $180 million, according to Zacks Research.
Meanwhile, Tipranks has a consensus Hold rating, based on 21 analysts who offered 12-month price targets for Twitter in the last 3 months. The average price target is $52.70 with an estimated high of $80.00 and an estimated low of $32.00. The average price target represents a 42.86% change from the last price of $36.89. The consensus EPS forecast for the quarter is $0.33.
Twitter’s previous third-quarter results showed some slowdown in annual growth, largely due to the normalization of the boom caused by Covid-19 and regulatory changes. While the Q3 earnings impact of Apple’s privacy-related iOS changes were lower than expected, broadly the earnings report generated negative ripples, as seen in Twitter’s stock price which has been on a downward trend since then. To make matters worse, following Wednesday’s disappointing earnings report from Meta Platforms/Facebook, shares of social network operators like Pinterest, Snap and Twitter themselves were dragged to the downside.
Twitter shares traded 5.5% lower on Thursday. The stock had slumped more than 26% in January to a low of $32.05 before struggling to recover in the $37.53 price range at the close of the month. Currently, the asset price is trading in a price range between $32.05 and $38.18.
#Twitter, D1
Twitter’s share price has been trading in a downtrend, as reflected by a series of lower highs and lows since peaking in July 2021. It is currently trading below the $38.18 resistance and holding below the 26-day moving average in the RSI divergence bias and Unconfirmed MACD. The higher lows forming on the MACD might suggest some fading downward momentum, and as the Relative Strength Index (RSI) has departed from oversold territory on the daily chart, this could increase the chances of a short term rebound.
A disappointing earnings report would likely bring asset prices to the downside, to retest the recent low of $32.05, and on a break of this level the projected target would fall to the FE138.2 level first (from the draw of the 80.66 peak – 48.70 and 73.17) before testing the next levels. On the upside, a better-than-consensus report would likely see asset prices test $41.03 and $48.21. Nonetheless, whether this marks a near-term low for the share price remains to be seen, given the overall trend still appears to be biased to the downside.
Twitter’s strategy is to adopt machine learning and personalization to improve ad targeting, which may seem promising at first glance, but given that it’s still in its early stages, the market will be looking for signs to see if it can help mitigate Apple’s impact. Investors will also be on the lookout for any guidance from the new CEO on his long-term growth strategy in upcoming earnings calls.
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Ady Phangestu
Market Analyst
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