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After scuffling through a rough patch during the early days of the pandemic, Twitter Inc. has rebounded with a bounce in the digital advertising market and is getting ready for its second $1 billion quarter.
The company TWTR, +0.48% that famously booted former President Donald Trump from social media is enjoying a resurgence in digital ad spending that greatly supercharged the quarterly results of Google parent Alphabet Inc. GOOGL, +1.71% GOOG, +1.73% and Facebook Inc. FB, +0.60% in recent days.
Total world-wide digital ad spending is on track to reach $395.5 billion by the end of 2021, up 16% from 2020, according to researcher eMarketer. Twitter’s total world-wide ad revenue will reach $3.4 billion by the end of 2021, up 24% over last year, eMarketer added, though the company’s share of the market would be a paltry 1%.
“The obvious elephant in the room around forward commentary is the potential engagement drop off in 1Q (usually a seasonally strong quarter for DAU net adds) around the recent account purge [of Trump],” Barclays Capital analyst Ross Sandler cautioned, noting a modest estimate of 193.5 million daily active users by FactSet.
Another telltale sign will be if Twitter — like Facebook, Snap Inc. SNAP, +9.14%, Pinterest Inc. PINS, +5.29%, and Unity Software Inc. U, -14.13% — warn investors of possible headwinds from Apple Inc.’s AAPL, -0.31% forthcoming iOS 14 and its more-restrictive privacy settings on third-party apps like Twitter.
In recent days, the microblogging service has made moves to expand content. On Thursday, Google Cloud announced a new, multiyear, strategic partnership in which Twitter will move offline analytics, data processing, and machine learning workloads to Google’s Data Cloud.
In late January, Twitter announced it had acquired Revue, a platform that lets people make editorial newsletters. Twitter will take a 5% cut of subscription revenue that users of Revue generate. Twitter also said it had broadened its partnership with Comcast Corp. CMCSA, -0.66% to bolster content on Twitter.
What to expect
Earnings: Analysts polled by FactSet on average expect earnings of 29 cents a share, which would be an increase from 25 a share in the fourth quarter of 2019. The estimate has risen from 22 cents a share on Sept. 30.
Contributors to Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others, are also projecting earnings of 29 cents a share on average.
Revenue: Analysts on average expect Twitter to report $1.18 billion in fourth-quarter revenue, according to FactSet, up from $1.01 billion the year before.
Estimize contributors are expecting revenue of $1.18 billion.
Stock movement: Through Friday, Twitter shares are up 53% over the past 12 months, giving the company a market value of $44.9 billion. The S&P 500 index SPX, +0.39% has increased 17% in the past year.
What analysts are saying
• “Trump’s banning by Twitter, complaints about ‘censorship,’ the emergence of Parler and Gab, and the weeding out of QAnon accounts may have triggered defections by more ardent Trump supporters, offsetting any growth that occurred during the quarter.” — wrote Wedbush Securities analyst Michael Pachter, while reiterating a neutral rating and $47 price target on Feb. 5.
• “The first half of 2020 was a trying time for Twitter, as its ad business was severely impacted by the cancellation of live events and the summer’s ad boycott. But as events started returning in Q3, so too did advertisers. Q4 could be an equally strong quarter, with the holiday season and improvements in direct-response offerings boosting spend, barring any potential pullback from advertisers around the 2020 U.S. presidential election..” — eMarketer analyst Jasmine Enberg said on Feb. 4.
• “The recovery in digital brand advertising demand was pretty solid at TWTR in 4Q based on our checks. Most categories are seeing higher commercial activity following the initial post-COVID-19 demand drop off. Tech, media/streaming, auto and CPG were all solid categories on TWTR in 4Q.” — Barclays Capital analyst Ross Sandler, while assigning an underweight rating and price target of $36 on Jan. 21.
