On Thursday, October 29, the Street’s gaze will turn on the mega caps - Apple, Facebook, Amazon and Google - as they are all slated to report Q3 earnings.
While certainly no lightweight, the smaller Twitter (TWTR) will also release its quarterly financial statement on the same day. Avid street watchers will be keen to find out how the microblogging platform fared during Q3.
Truist analyst Youssef Squali expects Twitter’s results to, overall, come slightly above the estimates. The 5-star analyst calls for revenue of $780 million, Adj. EBITDA of $179 million and GAAP EPS of $0.09 vs. the Street’s forecast for $769 million, $163 million, and $0.10, respectively.
As in the previous quarter, Squali expects user growth and engagement to stay robust.
“We believe Twitter should see sustained growth in users and engagement through the end of this year, as the pandemic, civil rights protests, and the upcoming US election result in more news flow and engagement, as the platform remains synonymous with real-time news,” Squali said.
Accordingly, Squali expects mDAUs (monetizable daily active users) to increase by 37% year-over-year to 199 million compared to the Street’s expectation for 195 million mDAUs in the quarter.
However, Squali believes Twitter still has monetization issues due to its “greater reliance on brand advertising (vs. the more popular DR (direct response).”
In Q2, Twitter said it had competed its first pilot of the new MAP (mobile application promotion) product, which is the linchpin of its ongoing strategy to bring in more direct response advertisers. It also said it was ready to set off on the second pilot.
Squali wants “more visibility” on its MAP platform, and along with the new ad server, considers its release essential for Twitter’s future monetization efforts.
“We believe that the timeline to release MAP 2.0 should still be intact, and we expect it to be out before the end of the year,” the analyst said. “Given the current environment where advertisers are favoring performance marketing (or DR) over brand marketing, there is urgency to ship this product and start leveraging it against the growing mDAUs base to onboard new advertisers, particularly SMBs. We expect contribution from the MAP product to be incremental over the next 12-18 months.”
Despite growing “incrementally positive on Twitter in the last few quarters,” its current valuation, uncertainty around its DR products, and cancellation of key large-scale revenue generating events, means Squali’s rating stays a Hold for now. The $40 price target remains, too, and implies a 20% downside from current levels. (To watch Squali’s track record, click here)
There is similar sentiment amongst Squali’s colleagues. TWTR's Hold consensus rating is based on 3 Buys and 15 Holds. At $45.05, the average price target suggests shares will decline 8% in the year ahead. (See TWTR stock analysis on TipRanks)
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