What TWTR Investors Need to Know Before Tuesday’s Earnings

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Earnings season has been a mixed bag so far for internet-oriented companies. Google Inc. (NASDAQ:GOOG, NASDAQ:GOOGL) and Yahoo! Inc. (NASDAQ:YHOO) missed their earnings estimates for the previous quarter, while Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) managed to report their expected bottom lines.

What TWTR Investors Need to Know Before Tuesday's EarningsMSFT, GOOGL, and AMZM all moved decidedly higher following their earnings reports, however, while YHOO shares slumped.

The disparate results from these technology bellwethers makes it tough to not only predict what sort of numbers Twitter Inc. (NYSE:TWTR) produced in its previous quarter, but what sort of response TWTR shares will dish out on Tuesday after the close when Twitter earnings results for its first quarter are unveiled.

Tough or not, though, current and would-be owners of Twitter stock need to know what’s expected — and what factors may lead to an earnings beat or miss.

TWTR Earnings Expectations

As a refresher, the micro-blogging company is riding into its upcoming earnings announcement with reason to be confident. In the fourth quarter of last year, the Twitter earnings report indicated revenue had nearly doubled on a year-over-year basis, from $243 million to $479 million, and income expectations of 6 cents per share of Twitter stock were obliterated by an actual profit of 12 cents per share of TWTR.

It wasn’t an across-the-board victory in the fourth quarter, however. Although TWTR ramped up the number of monthly active users by 20% on a year-over-year basis, that total headcount of 288 million still fell short of the 292 million active users analysts had been expecting the company to report.

This time around, the pros expect the Twitter earnings numbers to indicate the company turned a profit of 4 cents per share of TWTR on $456.5 million in revenue. That top line would be 82% stronger than year-ago revenue levels of $250.5 million, and the expected bottom line would be leaps and bounds better than the breakeven Twitter posted for its first quarter of 2014.

Truth be told, the company has likely set itself up to top earnings estimates in a rather handy fashion.

Aside from a likely-deliberate effort to underpromise and overdeliver back in February when the company offered modest Q1 revenue guidance of only $440 million to $450 million, Twitter also put a handful of new revenue-bearing initiatives in place during the first quarter.

One of the more exciting initiatives was the introduction of a ticket-sales platform for events such as concerts or professional sports. Meanwhile, though it was only acquired late in the quarter, the launch of live video-streaming app Periscope could have had a chance to draw a crowd and therefore drive some incremental revenue in the last few days of March.

3 Things for TWTR Investors to Chew On

While the trailing Twitter earnings numbers are a crucial part of the company’s story, they’re not the whole story for TWTR investors. There are three bigger-picture factors that could impact the value of Twitter stock soon, if they haven’t already, even if they don’t come up during the Twitter earnings conference call:

  1. Data Mining: While Twitter predominantly generates revenue by selling advertisements, it’s not the only way the company makes money. Almost 10% of its revenue is generated by collecting and analyzing all the data packed into all those Tweets, which can ultimately give a company and/or potential advertiser a true picture of how the public feels about a particular product or service. Twitter has only scratched the surface of this potential, though it’s largely been ignored by investors.
  2. Meerkat: While between Vine and Periscope Twitter arguably has the most prolific video-sharing platform on the web, that may not be a permanent situation. Rumors are starting to circulate that Facebook Inc. (NASDAQ:FB) could be interested in acquiring video-sharing rival Meerkat. Though it already has a similar video-sharing app, just through its sheer size alone Facebook could muscle its way into some of the video market currently controlled by Twitter.
  3. An Acquisition Target? As impressively as the company is growing, the notion that Twitter could be acquired by a bigger name (Google has been the most frequent suggestion to this end) remains the proverbial 800-pound gorilla in the room. The longer any suitor waits, the more expensive such a deal is apt to become.

Bottom Line for TWTR Stock

Never say never. But, between the success Twitter has been creating for itself of late in addition to the fact that other internet-centric stocks have mostly moved higher this earnings season on merely mediocre (or even poor) earnings news, odds are that TWTR will look even batter after Tuesday evening’s earnings announcement than it does now.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/04/what-twtr-investors-need-to-know-before-tuesdays-earnings/.

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