The social media behemoth will release its second-quarter results after the bell on Thursday, but analysts believe the company still has a lot to prove. Analysts believe that the company must execute in order for the stock to work, despite an abundance of new products and a rebound in advertising.
Nonetheless, Twitter’s stock is up 28 percent this year.
The impact of Apple’s changes to how it obtains permission to use devices’ IDFA is one of the key issues. The IDFA, also known as the identifier for advertisers, is a device identifier that businesses use to target customers on mobile apps or websites.
Investors will also be interested in updates on user growth.
According to Blackledge, the firm expects “accelerating” top-line growth, but the key for the stock will be the company’s third-quarter outlook.
Meanwhile, Bank of America analyst Justin Post maintained his buy rating but predicted that the IDFA would have a greater impact on this quarter’s results than previous quarters.
Post expressed optimism due to strong ad demand and the company’s capable lineup of products such as Mobile App Promotion, or MAP, which assists advertisers in targeting consumers.
“We believe [the] stock has benefited from optimism about new subscription services, while the MAP product ramp remains a significant opportunity,” he said, adding that “commentary on each will be important for sentiment.”
In his earnings preview note, Bernstein’s Mark Shmulik expressed optimism that the stock’s time in the “penalty box” was coming to an end.
“The setup for this earnings season appears to be improving,” Shmulik said.
Others, such as JPMorgan analyst Doug Anmuth, acknowledged a “healthy skepticism” but maintained his top pick status on the stock.
“Industry checks indicate that the online ad market remains strong—supporting an increasingly digital economy—and we believe TWTR is benefiting from the return of events and launches, brand advertising ramping, and growth in MAP advertisers, including sports betting, crypto, and investing,” he added.
Twitter, however, remains a show-me story for Jefferies analyst Brent Thill.
“We are optimistic about Q2 fundamentals, but elevated multiples and execution concerns keep us on the sidelines,” wrote the firm.
“We believe the stock has benefited from optimism about new subscription services, while the MAP product ramp remains a significant opportunity, so commentary on both will be important for sentiment…”
While we did not see the brand spend recovery that we had hoped for in Twitter’s 2Q guidance, we saw the outlook as conservative and believe that 2H brand strength is possible as events resume. Furthermore, we see opportunities for multiple new revenue-generating products to launch this year, as well as increased Spaces and Subscription activity.”
Bernstein has a market perform rating.
“Twitter’s time in the penalty box was brief, with the stock recouping the majority of its losses following poor results last quarter in comparison to peers and bullish investor expectations. However, the outlook for this earnings season appears to be improving. Revenue expectations have risen above management guidance yet again, but there is reason to believe that the company will deliver this time.
JPMorgan has an overweight rating.
“However, as we enter 2Q earnings, we continue to believe TWTR shares are undervalued, and we maintain a healthy skepticism about execution. Industry checks indicate that the online ad market remains strong, supporting an increasingly digital economy, and we believe TWTR is benefiting from the return of events and launches, brand advertising ramping, and growth in MAP advertisers, including sports betting, cryptocurrency, and investing.”
“Items: Going into print, we are focused on three key things: (1) progress on monetizable daily active users and revenue guidance given at Investor Day in February after missing the Street in 1Q, (2) use of Spaces, Super Follows, and other potential monetization avenues for the platform, (3) rollout of new ad products including Launch and Branded Likes, and (4) updates on partnerships and media.
Wedbush has a neutral rating.
“We expect an inline quarter from Twitter, which we continue to believe is least exposed to the ecommerce advertising tailwinds driving digital advertising growth, but should benefit from a continued bounce back in brand ad dollars.”
Overall, the renewed focus is a positive, but questions remain about the impact new products can have on user growth.”
Cowen’s market performance rating
We anticipate accelerating 2Q21 top-line growth on the back of easy 2Q20 comp from the start of the pandemic, when TWTR ad revenue fell 22 percent year on year. The 3Q21 outlook, the impact of the iOS 14.5 change, and an update on TWTR’s MAP and DR (direct response) initiatives will be key at the print.”
Evercore ISI- Average rating
Given the continued strength in online advertising and the company’s own reporting track record, we believe the Street’s $1,064MM Revenue estimate is potentially conservative; however, the Street’s Operating Income estimate appears somewhat aggressive, as it is materially above guidance. We also believe the Street’s 7MM mDAU Net Adds estimate is reasonable, albeit with a slightly higher risk of downside variance due to typical seasonality and re-opening headwinds.
Jefferies has a Hold rating.
“While we are bullish on Q2 fundamentals, elevated multiple and execution concerns keep us on the sidelines. TWTR, in our opinion, is well positioned to outperform street rev and mDAU expectations. A robust live event schedule (e.g., Euro Cup, Olympic Trials, Oscars, etc.), a resurgence in brand ad spend, and recent checks indicating improved advertiser traction on direct response ad products all contribute to our confidence.”
Wells Fargo has an Equal Weight rating.
“We anticipate a relatively strong quarter, driven by continued ad revenue growth, ongoing growth in key international markets (Japan), and product innovation (ad platform improvements, Twitter Blue), offset by a potential mDAU (monetizable daily active users) slowdown amid tougher comps and a return to pre-pandemic COVID-19 engagement trends.”