Twitter Could Miss Second Quarter Expectations

Twitter Inc. (TWTR) reports Q2 2021 earnings after Thursday’s closing bell, with analysts looking for a profit of just $0.07 per-share on $1.06 billion in revenue. If met, earnings-per-share (EPS) will mark a turnaround from the $0.16 loss posted in the same quarter last year, which included the exit from the first pandemic lockdown The stock fell nearly 10% in April after reporting weaker-than-expected Q1 user growth and providing weak Q2 revenue guidance.

Betting on Twitter Blue

The social media outlet hopes the Twitter Blue subscription service will improve its tepid bottom line in coming quarters. It rolled out the premium program in Australia and Canada in June but there’s no U.S. release date. According to the press release “we’ve heard from the people that use Twitter a lot, and we mean a lot, that we don’t always build power features that meet their needs. Well, that’s about to change. We took this feedback to heart, and are developing and iterating upon a solution that will give the people who use Twitter the most what they are looking for.”

U.S. media outlets that booked massive subscription gains during the Trump years are reporting sharp readership declines as we enter the second half of 2021, reflecting disengagement generated by the pandemic and the less-bombastic governing style of President Joe Biden. Twitter and rival Facebook Inc. (FB) are vulnerable to the same forces of political exhaustion and mean reversion, raising odds that daily average user (DAU) growth will miss Q2 expectations.

Wall Street and Technical Outlook

Wall Street consensus has deteriorated since April despite the new offering, with a ‘Hold’ rating based upon 9 ‘Buy’, 1 ‘Overweight’, 26 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts recommend that shareholders close positions move to the sidelines. Price targets currently range from a low of $30 to a Street-high $83 while the stock closed Friday’s session just $1 above the median $65 target. This placement suggests that Twitter is fully-valued at this time.

Twitter sold off from 74 in 2013 to 14 in 2016, turning higher into the 2018 high at 48. It posted a higher low during the pandemic decline, ahead of renewed upside that reached multi-year resistance in October 2020. A February 2021 breakout failed, yielding more than four months of mixed action between resistance in the mid-70s and support in the upper 40s. The tape has shown little accumulation since May despite a persistent uptick, predicting rangebound action well into the fourth quarter.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.