Twitter (TWTR) to Report Q3 Earnings: What's in the Cards?

Twitter TWTR is set to report third-quarter 2020 results on Oct 29.

The Zacks Consensus Estimate for revenues stands at $765.3 million, indicating a decline of 7.1% from the year-ago quarter reported figure.

Meanwhile, the consensus mark for third-quarter earnings has increased 20% over the past 30 days to 6 cents per share. The company had reported earnings of 17 cents in the year-ago quarter.

The social media company did not provide its third-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 one of the trailing four quarters and missed thrice, the average negative surprise being 1716.4%.

Twitter, Inc. Price and EPS Surprise

Twitter, Inc. Price and EPS Surprise

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

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

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 $632 million, indicating a decline of 10% from the year-ago quarter’s reported figure.

Though 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 Such companies are likely to have withdrawn ad contracts with Twitter in the to-be-reported quarter for fear of associating their brands with the sensitive topic.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 second quarter of 2020, average mDAU was 186 million compared with 139 million in the year-ago quarter and 166 million in the previous quarter.

The company’s initiatives to prompt some users to click on links to other websites before retweeting them to stop the spread of misinformation and encourage more thoughtful communication 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 ahead of the presidential election in the United States on Nov 3 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 Q3

During the quarter, Twitter and WebMD announced a partnership that will bring more WebMD content right to the Twitter feed with video content and Twitter Moments. This will help in educating consumers on health topics. It will also highlight patient stories on what it’s like to live with and manage chronic conditions and other health issues.

On Sep 8, Twitter, Bud Light and NFL unveiled Bud Light Showtime Cam that creates a dedicated place for players to celebrate major moments throughout the games with their fans.

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. But that’s not the case here.

Twitter has an Earnings ESP of -2.06% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

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

Alphabet GOOGL has an Earnings ESP of +7.40% and carries a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple AAPL has an Earnings ESP of +2.97% and a Zacks Rank #3.

Shopify SHOP has an Earnings ESP of +23.02% and a Zacks Rank of 3.

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