With better-than-expected first-quarter results in April, all eyes are now on Twitter Q2 earnings, which the company will present on July 27 before the market open. Given the surprise that the company threw for analysts just last quarter by reporting a 68.75% increase in earnings, expectations for its Q2 earnings are also high.
Analysts positive on Twitter Q2 earnings
About six months ago, the micro-blogging firm was fighting for its existence with key employees leaving, stagnant user growth and dropping revenue.
“For a company that people thought six months ago was knocking on death’s door and going the way of Myspace and AOL, the double-digit rebound and the continued acceleration in users has really surprised investors,” said BTIG Research analyst Richard Greenfield.
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But things have been looking positive since the company reported its last earnings. Since the release of the first-quarter earnings, Twitter shares are up almost 40%. Last quarter, investors were delighted to see better-than-expected growth in monthly active users, and the company has made efforts to repeat that performance in the most recently completed quarter as well. The micro-blogging site has made several changes to its platform to retain its users and attract new ones.
During the second quarter, the company announced that it had improved its mobile app to make it more user-friendly with bolder headlines and an easier reply feature for tweets. Further, video content has been one area in which Twitter made a lot of improvement by adding features such as live content on its platform. Twitter’s focus on video content is no surprise, given the fact that it earns higher revenues.
Regarding Twitter Q2 earnings, Wedbush analyst Michael Pachter feels that the company will be able to surpass Wall Street expectations. However, the analyst added that the long-term trend is not something to be delighted about. He noted that an increase in user growth and better user experience are positive, but “revenue stagnation and variability around results remain limiting factors.”
Can Twitter grow in the long term?
Meanwhile, Cantor Fitzgerald maintains its Neutral a rating on the company ahead of the earnings release and believes revenue dropped on the back of product re-alignments and cut-throat competition. Analyst Kip Paulson states that there has been a healthy increase in daily active users in the last four quarters, but the important question to ask is whether or not management will be able to maintain this growth rate, improve user engagement further and win marketers.
However, many analysts believe that there are several positive signs which can act as a cushion for the future of the company, like purchase of shares by co-founder and Chief Executive Officer Jack Dorsey and the return of co-founder Biz Stone. Ex-banker Ned Segal has also been appointed as chief financial officer at Twitter, notes Reuters. In another bit of positive news for the company’s stock, Contrarius Investment Management Ltd increased its stake in Twitter by 9.97%, according to its 2016Q4 regulatory filing with the SEC.
In pre-market trading today, Twitter shares were in the green. Year to date, the stock is up almost 32%, while in the last year, it is up almost 55%.