Twitter, Tesla and Elon – it's everyone's favourite tech drama. Twitter (TWTR, $39,60) is scheduled to release second-quarter earnings before US markets open on Friday. The company will not be holding its usual earnings conference call ‘due to the pending acquisition’ by Elon Musk.
A year-over-year decline in earnings on higher revenues is anticipated when Twitter reports its results for the June quarter. According to Zacks Investment Research, the consensus EPS forecast for the quarter is $-0.06, lower than the previous quarter's 0.77 per share and below the same quarter last year. However, it must be noted that it’s always not easy to predict earnings for Twitter and in the past four quarters, the reported figure has frequently missed or exceeded the expected number by a wide range.
Markets believe Twitter will have ended the second quarter with 237.5 million average monetizable daily active users compared to 229.0 million at the end of the first. User numbers will be closely watched considering Musk’s main argument for trying to walk away from the takeover centres on accusations there are far more fake accounts on the platform than Twitter claims. The advertising revenue will be closely watched for Q2 as investors expect a declined demand for advertising thanks to the slowing economy and tightening economic environment.
Why it matters
Technology stocks have been thrashed recently, so Twitter’s likelihood of punching above $US50 a share in the short term is likely dependent on one thing: the Delaware Court of Chancery. It will rule on Twitter’s demand for Musk to complete his $US44 billion purchase of the company. The company’s argument is that it has fulfilled every reasonable request from Musk to provide data on spam accounts, been honest with regulators and the public and now faces a petulant billionaire unhappy with his decision to buy the company.
