Monday, May 25, 2015

Twitter Inc (TWTR) Q4 Earnings Preview: What To Watch?

Twitter Inc (NYSE:TWTR) will report its first set of earnings as a public company on Feb. 5. On the same day, Twitter will hold a conference call to discuss the fourth quarter financial results at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).

San Francisco, California-based Twitter is one of the world's largest social networks with over 230 million monthly active users. The service is free for its users, but the company generates revenue through advertising and data licensing.

Wall Street expects Twitter to report a loss of 2 cents a share while revenue is estimated at $217.78 million, according to analysts polled by Thomson Reuters.

[Related -Gold hasn't lost its allure in my portfolio]

As with any social networking site, the ability to monetize users and traction on mobile will be the key focus. Advertising revenue is a key metric. UBS analysts expect ad revenue of $213 million and mobile ad revenue of $158 million.

Data Licensing revenue is another focus. Given the scale and real-time nature of the Twitter platform, this business could be a significant contributor longer-term, despite the company currently focusing on the advertising opportunity

Worldwide desktop data for Twitter showed a 2.4 percent increase in unique visitors but a 48 percent decline in total page views and a 30 percent decrease in total minutes for the first two months of the quarter, according to comScore. These data reflect the shift towards mobile usage.

[Related -Twitter Inc (NYSE:TWTR): Social TV – A Big Catalyst For Shares]

According to comScore, U.S. mobile data for Twitter showed unique mobile visitors (iPhone + Android) were up 20.4 percent and that total user minutes were up 46.0 percent.

UBS analyst Eric Sheridan views that higher mobile engagement as a positive in the face of weaker desktop usage data, particularly since 76 percent of total monthly active users (MAUs) are from mobile.

The Street will focus on MAUs, especially on the mobile front, as well as timeline views. Sheridan sees global MAUs of 249 million and timeline views of 167.4 billion.

Adjusted EBITDA margins are another key metric. Twitter's stated long-term adjusted EBITDA margin target is 35 to 40 percent and investors look at the progress on that front.

Twitter recently acquired MoPub, a mobile advertising exchange. This was a smart strategic acquisition for Twitter as it will bolster its efforts towards greater programmatic ad selling and achieving scale. Management may provide additional color on the initial benefits being generated from this acquisition.

During late third quarter and throughout the fourth quarter, Twitter released a wave of enhancements to its core platform and to its advertising product suite which could serve to increase user engagement and/or increase the appeal of the platform to advertisers.

The enhancements include Lead Generation Cards (allow marketers to collect information on qualified leads); Scheduled Tweets (allows marketers to schedule Tweets for future publication); Photo/video previews in Tweets and Custom Timelines (Timelines featuring a set of user-curated Tweets).

The company also launched enhanced mobile targeting (by device, OS, etc.); Search filters in the mobile app; Tailored Audiences; Native advertising product in MoPub; and conversion tracking.

Out of several enhancements, Tailored Audiences is worth mentioning. On Dec. 5, Twitter announced Tailored Audiences – its retargeted advertising product. Similar to Facebook's FBX, Tailored Audiences provides a mechanism for advertisers to market directly to customers who have engaged with their own websites, with one notable difference Twitter's offering includes the ability to reach customers on mobile.

Sheridan said Tailored Audiences could be a material driver of revenues going forward, given increased advertiser adoption of re-targeted advertising over the past year.

During the quarter, Twitter also debuted the See It functionality (provides TV remote control-like features via Twitter) and TV conversation targeting (allows networks and brands to promote Tweets to users who engage with specific shows). These enhancements are designed to establish Twitter as the go-to second screen platform.

Additional topics to be discussed on the call include monetization of Vine, a mobile app owned by Twitter that enables its users to create and post short video clips. Investors could also look for investment plans for MoPub or to create a Twitter Ad Network. Further, Twitter's recent purchase of 900 patents from IBM could also be discussed.

Investors have high expectations from the quarter as this will be Twitter's first quarter following its IPO late last year. With only 27 percent Buy ratings on the sell side and the average target price of $50, investors expect a substantial beat. TWTR shares, which have a market cap in excess of $34 billion, have gained more than 40 percent since it began trading on Nov. 7, 2013. 

No comments:

Post a Comment