When the now Elon Musk-owned social media and digital news platform reports Q1 2022 earnings before market open on Apr 28 Thur, will it be the terrific Twitter or its terrible twin that show up? Let’s find out…
Image credits: the Hustle
Earnings, Revenue and Users
Consensus estimate by analysts is for Twitter to report earnings per share (EPS) of -$0.17 down a massive 221.4% from the previous year, despite a projected revenue increase to $1.21 billion or +17.5%. See Table below.
Twiter earnings history, comparing year-on-year (y-o-y). Sources: Market Beat, Zacks Consensus Estimate
The other key metric, growth of monetizable daily active users (mDAU) which hit 217 million in the last quarter is a bit of an unknown. What is clear, both mDAU and EPS are expected to be worst off, due to battling the three-headed ‘monster’ of privacy restriction, high inflation and geopolitical crisis. Privacy restriction reduces Twitter’s ability to track users and target them with ads, especially in iOS. High inflation causes advertisers to cut back on ads spending and users on their online consumption. Finally, prolonged geopolitical crisis results in loss of users and revenue from Russia, and softer demand across Europe.
Just last Feb 2021 quarter, the Board has set ambitious targets of hitting 315 million mDAU and $7.5 billion in revenue by the end of 2023. Those targets seem unachievable or even absurd now. Some has speculated that due to all these headwinds and terrible mis-projections, the Board was in a hurry to close the deal with Elon Musk to buy-out Twitter, before the earnings announcement.
Price Action
$Twitter(TWTR)$ stock price has been on the terrible downtrend since Oct 2021, falling as much as 55% from the peak, before the recent Musk’s takeover news saw it clawed back up to only down 30% from the highs.
If earnings and outlook turn out terribly, I expect further downside of potentially 10 to 20%, back to $44 and $40 (red Downside Target 1 and 2 on chart)
If however earnings and outlook turn out positive, or better yet, there are some terrific plans and projections from the new owner, price might shoot up, and between 10 and 23% price upside might be possible (green Upside Target 1 and 2 on chart).
Daily Chart of TWTR
Verdict?
On balance, it looks like terribly twin is likely to emerge, even if we should not rule terrific Twitter.
Either way, I would only look for trade setups based on my entry and exit targets in the chart post-earnings, as recently, results have been a bit of a lottery, and hard to predict.
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