Please ensure Javascript is enabled for purposes of website accessibility

What to Watch When Twitter Reports Earnings

By Daniel Sparks - Updated Jan 16, 2020 at 8:57PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Can the social network get investors excited again following last quarter's disappointing results?

Twitter (TWTR 1.89%) recently put a date to its fourth-quarter earnings release. The company will update investors on how it performed in the important holiday quarter on Feb. 6. 

The fourth-quarter report comes after a third-quarter update that disappointed the Street. Shares slid nearly 20% after the social network reported worse-than-expected revenue and non-GAAP (adjusted) earnings per share. Management cited some glitches in its ad products and advertising seasonality as reasons for the disappointing results.

Investors will be looking for signs of revitalized growth when the tech company reports fourth-quarter results. The stock has risen some since its big post-earnings decline, but it still sits about 15% below where it was before the third-quarter update.

Ahead of the social network's earnings report early next month, here's a preview of two key areas worth watching.

A businessman looking at his smartphone in the backseat of a limo.

Image source: Getty Images.

Revenue growth

Considering the company's top-line flop in Q3, the most closely watched figure when Twitter reports its fourth-quarter results will probably be its revenue growth. In Q3, Twitter reported revenue of $824 million -- at the low end of its guidance range for revenue between $815 million and $875 million, and below analysts' average estimate for the key metric. Total revenue was up 9% year over year, a significant deceleration from 18% year-over-year growth in Q2. 

While Twitter said its advertising business rebounded in September (the first month of Q4) and that it was seeing strong demand for its ad products, it also said headwinds from glitches in revenue products were lingering into the fourth quarter.

"While we are taking steps to remediate these issues, we expect them to continue to weigh on the overall performance of our advertising business in the near term," management said in its third-quarter shareholder letter.

Specifically, Twitter guided for fourth-quarter revenue between $940 million and $1.01 billion. The midpoint of this guidance range implies 7% year-over-year revenue growth. Analysts, however, are betting Twitter's revenue during the period comes in at the high end of this guidance range, growing nearly 10% year over year.

User growth

Beyond Twitter's revenue growth, investors should also look to the company's reported growth in monetizable daily active users. While revenue growth in Q3 was disappointing, the company is firing on all cylinders when it comes to attracting new users and helping existing users become more engaged.

Twitter's growth rate in monetizable daily active users has accelerated for three quarters in a row. The growth rate has gone from 9% in the fourth quarter of 2018 to 17% in the third quarter of 2019.

Can Twitter keep up this strong growth in daily active users?

The company is scheduled to report its fourth-quarter results before market open on Thursday, Feb. 6.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Twitter, Inc. Stock Quote
Twitter, Inc.
TWTR
$39.41 (1.89%) $0.73

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.