Twitter (TWTR) to Report Q2 Earnings: What's in the Cards?

Twitter TWTR is set to report second-quarter 2020 results on Jul 23.

The Zacks Consensus Estimate for revenues stands at $700.6 million, indicating a decline of 16.7% from the year-ago quarter reported figure.

Meanwhile, the consensus mark for the second quarter has been steady at a loss of 3 cents over the past 30 days. The company had reported earnings of 22 cents in the year-ago quarter.

The social media company did not provide its second-quarter 2020 revenue and operating income guidance due to the pervasive impact of coronavirus anxiety on advertiser demand.

Notably, the company’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, the average surprise being 1.6%.

Let’s see how things have shaped up for the upcoming announcement.

Twitter, Inc. Price and EPS Surprise

Twitter, Inc. price-eps-surprise | Twitter, Inc. Quote

Factors to Consider

Twitter’s ad revenues are expected to have taken a hit since small businesses that primarily use social media platforms are likely to have curbed ad spending as a contingent measure to cope with the coronavirus-led crisis.

The Zacks Consensus Estimate for advertising revenues is pegged at $567 million, indicating a decline of 22% from the year-ago quarter’s reported figure.

Moreover, Twitter has become the go-to platform for news about coronavirus. Some brands are hesitant to advertise alongside coronavirus discussions on social media platforms. Such companies are likely to have withdrawn ad contracts with Twitter in the to-be-reported quarter for fear of associating their brands with the sensitive topic.

Nonetheless, management at Twitter stated that total monetizable DAU (mDAU), which measures the number of users, has been benefiting from frequent discussions on the burning issue of coronavirus and an improving product experience.

In the first quarter of 2020, average mDAU was 166 million compared with 134 million in the year-ago quarter and 152 million in the previous quarter.

The company’s initiatives to prompt some users to click on links to other websites before retweeting them in an effort to discourage the spread of misinformation and encourage more thoughtful communication on its social platform are expected to have helped it expand the monetized user base in the to-be-reported quarter.

Twitter’s improved ability to proactively identify and remove abusive content from the platform has been a notable development in this regard.

Moreover, the company’s updated policies to ban political ads are expected to have boosted trustworthiness of the platform.

Further, steady demand for video ad products like Video Website Cards and in-stream pre-roll is likely to have contributed to the top line.

Key Developments in Q2

During the quarter, Twitter announced that users can add voice notes to their tweets. Each tweet captures 140 seconds of audio and a new voice note will start if you reach that limit. The feature is currently available to a limited number of users on Apple’s iOS platform and is expected to be gradually rolled out to more iOS users.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Twitter has an Earnings ESP of +118.9% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are a few companies you may also want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Shopify SHOP has an Earnings ESP of +74.2% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Etsy ETSY has an Earnings ESP of +31.7% and a Zacks Rank of 2.

NXP Semiconductors N.V. NXPI has an Earnings ESP of +11.90% and holds a Zacks Rank of 2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.