Of the many tech companies reporting earnings this week, Twitter (NYSE:TWTR) will be one of the most interesting to watch. The company said in a timely update on its business in mid-March that it saw a boost in active users on its social network as consumers staying at home flocked to the platform to discuss COVID-19. But management also said advertising revenue took a hit. When Twitter reports its first-quarter results on Thursday, investors will be looking for an update on how these trends continued to unfold during Q1 -- and how they're panning out so far in Q2.
Putting pressure on Twitter when the company reports results, shares have recently rebounded sharply from the coronavirus market crash. The stock is up 36% since March 18. It's worth noting, however, that the stock is still down 6% year to date.
Here's a quick overview of some of the key items investors may want to check on when Twitter reports its first-quarter results this week.
First, investors will want to check on the company's user growth. Management already made it clear that the current environment has been a boon for monetizable daily active users.
"Global conversation about COVID-19 as well as ongoing product improvements are driving strength in total monetizable DAU (mDAU), with quarter-to-date average total mDAU reaching approximately 164 million, up 23% from 134 million in Q1 2019 and up 8% from 152 million in Q4 2019," Twitter said in a March 23 update.
The social network, of course, is built to enable and serve public conversation, making it the perfect platform for discovery and discussion of all things related to COVID-19. Also serving as a catalyst, overall internet usage has risen as more people sheltering at home.
What's notable about Twitter's reported daily active users for Q1 on March 23, however, is that there was still about a week left in the quarter. Further, the final week of the quarter likely coincided with even greater internet usage, as many states' stay-at-home orders were just starting to be implemented. This means that Twitter's actual mDAU for the period may be well over 164 million.
Despite a rapidly growing active user count during Q1, revenue growth may only be flat or slightly down year-over-year for the period, management said in its business update last month.
"Twitter had a strong start to the year before the effects of COVID-19 began spreading more broadly, including a successful Super Bowl and overall strength in the US," said Twitter CFO Ned Segal in the company's March update. "The COVID-19 impact began in Asia, and as it unfolded into a global pandemic, it has impacted Twitter's advertising revenue globally more significantly in the last few weeks."
It's not surprising that advertising demand seems to be weaker during this time. Some retailers have had to temporarily close stores and travel restrictions have disrupted virtually every company that serves the travel and vacation industry.
Though management did say that "the near-term financial impact of this pandemic is rapidly evolving and difficult to measure." So, there could be an upside or downside surprise for Twitter's revenue even though management provided a forecast with only about a week left in the quarter.
Twitter will report its first-quarter results before market open on Thursday, April 30.