Huge Catalyst for Twitter Stock
Twitter Inc (NYSE:TWTR) is set to report its first-quarter earnings results after the bell on Tuesday and there’s a lot of pressure on the social network to reverse a series of disappointing results. Investors have hammered TWTR stock over the past year, which has declined 66% in that time.
But there is still hope for TWTR stock. Now that co-founder and CEO Jack Dorsey has been in charge for a few quarters, analysts are hoping he can restore confidence in TWTR stock again.
If Twitter manages to deliver on one key earnings number or even exceed expectations, TWTR stock has a good chance at reversing its downward trend. But before we get to that, let’s take a look at what’s expected from Twitter’s financial performance.
Analysts are still expecting fast growth from Twitter. The company is expected to report revenue of $608 million, up 39.4% from a year ago. On the earnings front, Twitter is forecasting earnings per share (EPS) of $0.10, which is up 43% from the same quarter in 2015. While these numbers sound impressive, they also represent a deceleration in year-over-year growth. Revenue grew 48% in the fourth quarter.
If the past is any indication, Twitter should have no problem hitting those numbers or even exceeding them. But investors aren’t concerned right now with Twitter’s financial numbers.
Once again, investors will be focused on user growth, which has been declining sequentially for several quarters. Twitter has been unable to grow beyond its 320 million monthly active users (MAUs) for two straight quarters now. A few yeas ago, Twitter and rival Facebook Inc (NASDAQ:FB) were neck and neck in the race to attract users. But Twitter has fallen way behind. Twitter seems like a small fish now compared to Facebook’s 1.59 billion MAUs.
Dorsey is trying to reverse the decline in user growth by simplifying the service and adding new features.
One of those features is video, which could be a major catalyst for TWTR stock. Once again, Twitter is behind in video though, which was just introduced on the social media platform last year with its live streaming app, “Periscope.” But it’s not too late for Twitter to catch up, as video on social media is just starting to take off. Twitter has yet to monetize Periscope, but you can bet there are plans to in the near future. And that could really help out TWTR stock.
Twitter might be able to get a major boost in MAUs with the recent broadcast deal it signed with the National Football League (NFL). The company is set to stream 10 Thursday-night NFL games during the 2016 season. According to Bloomberg, Twitter got the streaming deal for the bargain-basement price of around $10.0 million. (Source: “Twitter Gets NFL Thursday Night Games for a Bargain Price,” Bloomberg, April 5, 2016.)
It might not seem like it right now, but this is a huge win for Twitter, as it could reinvigorate user growth. The deal with the NFL could also pave the way for more video deals to include other sports, political content, and entertainment on Twitter. And at only $1.0 million per game, Twitter has nothing to lose from this deal.
The Bottom Line on TWTR Stock
There you have it: it all comes down to monthly active users. If Twitter can show that it’s adding users again, TWTR stock could reverse its downward trend. But if Twitter can show that it’s adding users at a good pace, TWTR stock could surge.