Two major social media stocks report earnings this week: Twitter (TWTR) on Tuesday and LinkedIn (LNKD.DL) on Thursday. Both companies are at critical junctures in their evolution as social networks, making their third-quarter reports and earnings reports particularly critical. The immense pressure on these companies to perform is evident by the decline of their stock prices during the last six months. Twitter is down 40% and LinkedIn is down 19%. With such big swings for these stocks in such a short period, and considering how volatile these growth stocks often are, this could be a very volatile week for these social media stocks.
Here's what investors should know about these two companies ahead of their earnings releases.
Key metrics to watch
For both companies, a key area for investors to check in on when they report earnings in order to get a quick pulse check on their growth prospects will be revenue and member growth.
What should investors expect from these figures? Here's some relevant data to build a useful backdrop.
|
Company |
Q2 Revenue |
Q2 YoY Revenue Growth |
Q3 Revenue Guidance |
Implied YoY Growth of Guided Revenue |
|---|---|---|---|---|
|
|
$502M |
61% |
$545M-$560M |
51%-55% |
|
|
$712M |
33% |
$745M-$755M |
31%-33% |
YoY means "year over year." Table source: Author.
|
Company |
Q2 Users |
Q2 YoY User Growth |
Q2 Sequential User Growth |
|---|---|---|---|
|
|
316M |
15% |
3% |
|
|
380M |
21% |
4% |
YoY means "year over year." Table source: Author.
With these figures in mind, and considering both companies' histories of often beating their own guidance for revenue growth, it's reasonable to expect Twitter and LinkedIn to report revenue of around $560 and $755 million and users of about 324 million and 394 million, respectively.
What about earnings? Analysts, on average, are expecting Twitter to report non-GAAP EPS of $0.05, up from $0.01 in the year-ago quarter. The consensus analyst estimate for LinkedIn's EPS is $0.46, down from $0.52 in the year-ago quarter.
Checking in on narratives
Beyond the numbers themselves, investors will want to check in on a few important narratives.
Jack Dorsey, Twitter co-founder and CEO. Image source: Twitter.
For Twitter, look for an update from the company on how much of an impact the returning co-founder and CEO Jack Dorsey is having on the company. Probe for some insight into how long management expects for it to take for the team to address its slowing user growth problem.
LinkedIn investors should look for an update on how the integration of Lynda.com is panning out. While the acquisition seems to make sense on the surface -- even looking like a potentially transformational opportunity -- acquisitions don't always work out as eloquently as expected.
While there's no way to predict what direction these stocks will move when they report earnings, or if they will move at all, it's good for investors to be grounded in data before their releases. This helps investors make sense of any moves and put the earnings releases into perspective.
Twitter and LinkedIn will release their quarterly results after market close on Oct. 27 and 29, respectively. Both companies have earnings calls scheduled for 5:00 PM on the same day of their releases.
Stay tuned at The Motley Fool for post-earnings analysis of both companies.
