10 February 2021

Twitter Shares Rise Despite Slower User Growth

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What’s happening: Shares of Twitter gained in extended trading on Tuesday, after the social media company exceeded Wall Street targets for the fourth quarter.

What happened: With a rise in ecommerce during the pandemic and more companies relying on online sales, Twitter witnessed strong growth in its advertising revenues last quarter.

Despite beating estimates for fourth-quarter sales and earnings, Twitter’s user growth failed to meet market expectations.

How were the results: The San Francisco, California-based company reported solid growth in sales and earnings, with both figures topping expectations.

  • Sales climbed 28% to $1.29 billion, beating the consensus view of $1.19 billion.
  • Net income grew to $222.1 million, or 27 cents a share, from $118.8 million, or 15 cents a share, in the same quarter last year.
  • Adjusted earnings came in at 38 cents per share, surpassing Street estimates of 31 cents per share.

Why it matters: Twitter remained in the spotlight of debates around what content should be permitted on the platform. In an unprecedented move, the company blocked former US President Donald Trump’s account following protests at the Capitol in Washington DC. Meanwhile, Twitter held out against pressure from India’s government to ban accounts related to the farmers' protest. India is the third largest market by users for the company.

Twitter said that growth in users in the fourth quarter had been boosted by improvements in its products along with heightened global conversations on its platform on topics ranging from covid-19 to the US Presidential election.

The average monetizable daily active users on Twitter rose to 192 million, from 152 million in the year-ago quarter, but missed the consensus estimate of 196.5 million. However, the company’s ad revenues grew 31% year-over-year to $1.15 billion. Twitter said it was working on several tools to help advertisers boost sales of their products.

On January 26, Twitter reported the acquisition of newsletter platform Revue to offer users the ability to create and schedule newsletters, import email lists, and earn from paid followers.

The company’s expenses came in at $1.04 billion for the fourth quarter, a 21% rise versus the year-ago figure. Management said expenses could grow by at least 25% in 2021, with plans of increasing headcount by more than 20%.

Management guided to sales of $940 million to $1.04 billion for the first quarter, broadly in-line with the consensus estimate of $965.14 million.

What to watch: Markets will keep an eye on the social media company’s user growth. With Twitter looking to increase its workforce, investors will also monitor new initiatives and rising costs.

The Markets Today

     

The British Pound will be in focus today, after hitting multi-year highs versus the US dollar.

Context: The sterling climbed to its strongest level versus the greenback since April 2018, following positive developments related to covid-19 vaccines in Britain.

Details: Market sentiment for the British pound has been positive with some analysts saying they were bullish about the sterling, specifically versus the euro, with the quicker rollout of covid-19 vaccines in the UK than in other European nations.

Meanwhile, Britain is looking at increased testing of people arriving from abroad. They are already being put into quarantine in a bid to control the spread of new strains of the covid-19 virus, Environment Secretary George Eustice said.

The pound was also supported by the Bank of England’s comments at last week’s meeting, which eased fears of the central bank cutting interest rates to negative territory. While maintaining the base interest rate at 0.1%, the Bank of England said it would give at least six months to banks and lenders to prepare before announcing negative rates.

“As we have been arguing since last week’s Bank of England meeting, the move lower in EUR/GBP seems to have taken a breather, something we expect will continue near-term,” said Kristoffer Kjær Lomholt at Danske Bank.

The GBP/USD forex pair closed at $1.3818 on Tuesday, climbing to its highest level since April 27, 2018. Against the euro, the sterling traded slightly below its eight-month high level.

What to watch: In the absence of any major economic data from the UK today, markets will keep an eye on vaccine developments in the country. Traders may focus on economic reports from the US which will provide some direction to the GBP/USD.

Rising covid-19 cases remain a major concern for markets, with total infections surpassing 106.8 million globally.

Other Markets: US indices closed slightly lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.03%, 0.11% and 0.06%, respectively.

Support & Resistances
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Futures at 0400 (GMT)

What else to watch today

     

Germany’s consumer prices, Saudi Arabia’s GDP growth rate, Turkey’s unemployment rate, France's industrial production, South Africa's SACCI business confidence index, Brazil’s retail sales as well as the US MBA mortgage applications, inflation rate, wholesale inventories, EIA’s crude oil stocks, budget plan FY 2021 and monthly budget statement.

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