Twitter’s share price has been very volatile in 2022, trading between $32 and $51 at the time of writing. Though, its share price is currently trading close to the $50 mark after Elon Musk’s significant investment in the company helped lift its share price. This recent investment now has many investors questioning whether the company is a buy or sell ahead of its earnings on April 28th. This article will look at three key things to look for in Twitter’s Q1 ’22 earnings report and how it’s likely to impact its share price.
Some Recent Developments
Before we jump into the major factors to look at in the first-quarter earnings of Twitter, other recent developments that are worth considering. We are obviously talking about Elon Musk buying this social media platform and how quickly they took him up on it. His proposal comprised $54.20 a share. This offer made a lot of sense for the board and they quickly agreed to this deal.
The reason why this entire deal went on so quickly was partly because of the first-quarter earnings that Twitter is to report soon. Of course, there were some private calculations regarding company valuation but a lot of it has to do with Q1 earnings. The earnings are probably directly related to the board’s quick thinking on taking Musk’s offer.
Experts have been speculating that because the first-quarter earnings were not very impressive. And this was the reason why the board of directors showed no hesitation in going forth with the offer Musk was presenting. There have been significant predictions that talk about a report which will show a loss of millions of dollars. The analyst predicted a loss of 1.2 billion dollars in sales with a law of 19 cents per share. This will amount to a loss of 162 million dollars.
Anyone who has been following the previous year’s revenue report of Twitter knows that they reported profit. They generated more than one billion dollars in their previous year’s revenue. A profit of 68 million was also reported. The number of active users was also going up and had increased significantly as compared to the previous quarter.
Twitter and Its Goals
The vision of a company matters a lot in becoming successful. The goal of Twitter was to generate more than 7 billion dollars in sales. The number of active users was also expected to rise to more than 300 million in the coming year. Due to the loss in the first quarter, one can safely say that it will take the company some time and recuperation to get back on track. This only seems possible under the new leadership of Musk who has brought his own vision to get Twitter back in the game. Its goals might also change and new leadership which is why one needs to look at the key factors mentioned below in a different light.
EPS and Revenue Forecasts
The EPS forecast for the first quarter is predicted to be $0.0487. It has come down about 68.75% from the reported EPS for the first quarter of 2021. The predicted revenue is $1.23 billion for Q1, up 18.27% from the reported revenue for Q1 in 2021. the company has missed both EPS and revenue estimates in its last two quarterly earnings releases, and another earnings miss could result in the stock taking a hit.
Monetizable Daily Active users (mDAUs)
In Twitter’s Q4 ’21 report, monetizable daily active users (mDAUs) stood at 217 million, missing analysts’ expectations of 218.6 million. Nevertheless, Twitter still managed to grow its user base from 192 million in the same period of the previous year to 217 million in Q4 ’21, representing a respectable 13.02% increase. But, if the company shows another mDAUs miss for Q1 ’22, it’s unlikely to sit well with investors, given that the company stated its goal is to grow its active customers to 315 million by the end of 2023.
Twitter Blue Growth
Twitter has struggled over the years to grow its earnings, which is why they’ve been exploring further ways to diversify its revenue. One of these ways is through its Twitter Blue subscription service. For $2.99 per month, users get access to premium services not available to regular users, including ad-free news and customizable icons and themes. This new service could significantly boost its revenue if it can convert a high number of users. Its report would shed some light on the uptake for Twitter Blue and if it’s helping bolster the company’s earnings.
Trading Twitter’s Earnings
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Twitter needs to get closer to its goal of an increase in active users as well as generating better revenue. Being a social media platform it already has significant competition from Meta and Snap. There is an influx of multiple applications like Facebook, WhatsApp, Instagram, Snapchat, and TikTok. The solutions to numerous existing problems are important along with creating a platform that values high participation. Analysts predict that social networking apps will overtake web searching in the coming years. Twitter needs to step up its game in order to stay relevant.
There are many reasons why the development in the ownership of Twitter is significant. One needs to look closely at the EPS and revenue forecast along with the blue growth of the platform. The number of active users also needs to continuously increase. Without high participation, this platform will continue to sustain losses. It will be especially difficult because there is no billionaire who would want to take it off of Musk’s hands. Keeping a track of the goals as well as the competition is important in generating revenue in 2022.