24 July 2020

Investors Remain Chirpy Despite Twitter’s Q2 Miss

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What’s happening: Shares of Twitter Inc. rose more than 4% on Thursday despite the social media company missing revenue estimates for the second quarter.

What happened: Twitter’s advertising business was hammered in the quarter by businesses pulling back their advertising spend on social media platforms amid the global coronavirus crisis.

Despite Twitter missing revenue estimates and reporting a massive loss for the second quarter, investors were optimistic about the company’s prospects.

How were the results: The social media company swung to a net loss for the second quarter with a decline in sales and the reversal of a tax benefit recognised last year.

  • Revenues declined to $683 million, from $841 million in the same quarter last year, and missing the consensus estimates of $702 million.
  • Twitter posted a net loss of $1.23 billion, or $1.56 per share, versus a profit of $1.12 billion, or $1.43 per share, in the year-ago quarter.
  • Excluding tax considerations, losses for the quarter were 16 cents per share, versus expectations of a loss of 1 cent per share.

Why it matters: Twitter reported a 23% decline in its ad revenues to $562 million. Management said, however, that trends had started improving as the quarter progressed, with ad revenues down by only 15% in the last three weeks of June.

Faced by a sharp decline in ad revenues, which make up more than 80% of Twitter’s overall revenue, the San Francisco, California-based company said it was looking for new further business lines, including a potential subscription-based offering.

Meanwhile, Twitter reported its highest spike in daily users in the second quarter, with the average monetizable daily active users jumping 34% year-on-year to 186 million, beating expectations of 176 million. Users had grown by a record 24% in the first quarter.

Twitter acknowledged that its service had been hacked earlier this month, with hackers gaining access to at least 130 accounts, including that of Jeff Bezos, Joe Biden and Elon Musk.

Twitter neither issued any projections for the third quarter nor provided any update on ad spend in July.

How shares responded: Twitter’s shares gained 4.1% to reach $38.44 on Thursday following the release of quarterly results. The stock has risen by around 17% over the previous month and by 38% over the last three months.

What to watch: With management’s tone remaining optimistic about growth in advertising spend with the return of live sports, investors will look out for news of a rebound in Twitter’s ad revenues. Investors are also bullish about the company’s plans for a subscription-based offering, which can contribute to revenues even if only a small number of users turn to the new model.

The Markets Today

     

Crude oil will be in focus today, ahead of the Baker Hughes’s report on rigs.

Context: Crude oil settled lower on Thursday, extending the previous session’s decline after crude inventories in the US surprisingly rose. The persistent rise in coronavirus cases in the US fuelled fears of more shutdowns leading to another decline in energy demand.

Details: Crude oil prices had fallen on Wednesday, after closing at their highest level since March over the first two days of the week. Prices came under pressure after the EIA’s (Energy Information Administration) report showed an unexpected gain in US crude stockpiles. The EIA reported that US crude inventories had climbed by 4.9 million barrels in the week ending July 17, versus expectations of a decline of 1.9 million barrels.

WTI (West Texas Intermediate) crude for September delivery fell 2% to close at $41.07 per barrel on the NYMEX (New York Mercantile Exchange). September Brent crude declined 2.2% to reach $43.31 per barrel on ICE Futures Europe.

Among other commodities, August gasoline declined 1.9% to $1.2586 a gallon, while August heating oil slipped 1.3% to $1.2541 a gallon.

Meanwhile, natural gas futures surged on Thursday, as traders kept a close eye on storms in the Gulf of Mexico. The US EIA reported yesterday that domestic supplies of natural gas had risen by 37 billion cubic feet in the latest week, higher than the estimate of 33 billion.

August natural gas jumped 6.2% to settle at $1.785 per million British thermal units yesterday.

What to watch: Investors await data from the Baker Hughes crude oil rigs count. US crude oil rigs fell to 180 in the week ending July 17, versus 181 in the prior week. Crude oil prices could recover today after falling for two consecutive sessions. WTI crude traded higher by 0.4% at $41.22 during the Asian session.

Markets will continue to monitor the coronavirus numbers, with the total cases globally exceeding 15.4 million.

Other Markets: US indices trading closed lower on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.31%, 1.23% and 2.29%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UK’s retail sales, manufacturing PMI, services PMI and composite PMI, Spain's producer prices, France’s manufacturing PMI, services PMI and composite PMI, Germany’s manufacturing PMI, services PMI and composite PMI, Eurozone’s manufacturing PMI, services PMI and composite PMI, Italy’s consumer confidence and manufacturing confidence index as well as the US new home sales, manufacturing PMI, services PMI and composite PMI.

 

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