Earnings season is well under way, and a handful of big names are on deck. Next week's earnings releases notably include Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Twitter (NYSE:TWTR) -- two tech stocks that could see big moves.
Here's what investors should watch when Twitter reports its results on Wednesday, April 26, and Alphabet reports on Thursday, April 27.
Can Twitter restore investor confidence?
Going into Twitter's first-quarter report, investors seem to have little confidence in the company's ability to turnaround its business. With shares trading at $14.54 at the time of this writing, they're less than a dollar away from an all-time low of $13.73 and are down 15.1% in the past three months. Twitter's worse-than-expected revenue in its most recent quarter, combined with slow revenue growth recently, has set the bar low.
Analysts have a gloomy outlook for the quarter. On average, analysts expect Twitter to report revenue and non-GAAP EPS of $513 million and $0.01, respectively, down from $595 million and $0.15 in the year-ago quarter.
In Twitter's fourth-quarter shareholder letter, management said it's seen "increased competitive pressure resulting in a decline in our original Promoted Tweet engagement format." With Facebook's popularity with advertisers showing no signs of letting up, and the social network continuing to rapidly innovate with its ad products across its core Facebook app and Instagram, competitive pressure could continue to hurt Twitter.
Investors should look for management to provide some concrete evidence of a turnaround.
Will Alphabet live up to high expectations?
Unlike with Twitter, investors have high expectations for Alphabet when the company reports first-quarter results on Thursday. Look no further than the stock's price-to-earnings ratio of 30 for insight into just how bullish investors are on the company's growth potential. This P/E ratio is well above the average P/E ratio of 24.5 of stocks in the S&P 500 and tech peer Apple's P/E ratio of 16.9.
On average, analysts expect Alphabet to report revenue and non-GAAP EPS of $24.2 billion and $7.38, respectively. While analysts' consensus estimate for non-GAAP EPS is below non-GAAP EPS of $7.50 in the year-ago quarter, investors should keep in mind that Alphabet is no longer excluding stock-based compensation from its non-GAAP results starting with its first quarter of 2017. So it makes sense that Alphabet's non-GAAP EPS would decline year over year. Analysts' consensus estimate for Alphabet's revenue is a better reflection of the company's growth. A consensus estimate for revenue of $24.2 billion is up 19.4% year over year.
Beyond Alphabet's total revenue growth and its adjusted EPS, investors may want to look out for any commentary from management about mobile search and YouTube -- two areas of the company's business that have served as key catalysts for growth recently.
In addition, investors should look for an update on Alphabet's "other bets" revenue. While still representing only a fraction of total revenue, the segment saw its revenue soar 75% in the company's most recent quarter, hitting $262 million. Further, its operating loss narrowed from $1.2 billion to $1.1 billion.
Twitter reports its first-quarter results before the market opens on Wednesday, and Alphabet reports its first-quarter results after the market closes on Thursday. Stay tuned to The Motley Fool for analysis of these two tech companies' earnings reports after they go live.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Twitter. The Motley Fool has a disclosure policy.