On Jul 23, before the market opened, Twitter TWTR reported second-quarter 2020 adjusted loss of 16 cents per share that was much wider than the Zacks Consensus Estimate of a loss of 2 cents. The company had reported adjusted earnings of 5 cents per share in the year-ago quarter. Revenues declined 19% year over year to $683 million, which missed the Zacks Consensus Estimate by 3.8%.
However, Twitter witnessed considerable surge in user growth and thus shares gained more than 4% in the key trading session on Jul 23. Advertising revenues declined in the quarter due to the pandemic but the CFO says that an improving trend is brewing up. Twitter is actively exploring extra ways to make money from its users, including by incorporating a subscription model.
User Details
Average monetizable daily active users (mDAU) were 186 million in the reported quarter compared with 139 million in the year-ago quarter and 166 million in the previous quarter. User growth can mainly be attribute to regular discussions over the hottest issue of today — coronavirus — and an improved product experience.
The company’s success in providing relevant content to people’s Home timelines and notifications contributed to mDAU growth. Average U.S. mDAU was 36 million compared with 29 million in the year-ago quarter and 33 million in the previous quarter. Moreover, average international mDAU was 150 million compared with 110 million in the year-ago quarter and 133 million in the previous quarter.
Twitter has been focusing on reducing abuse on its platform. The company has improved its ability to proactively identify and remove abusive content from the platform.
Market Impact
Signs of improvement in the Twitter earnings scorecard boosted investor sentiment. The Zacks Rank #2 (Buy) stock has a good Momentum Score of A, but lacks value quotient as indicated by a Value Score of D. Overall, there is a high chance that the Twitter stock may perform well in the coming trading sessions, given its strength in user growth (see all technology ETFs here).
How Will Social Media ETF React Ahead?
Twitter’s results make it important for us to have a look at the social media Global X Social Media ETF SOCL. Twitter takes about 8.41% of SOCL, holding the third position. As a result, the company’s results are crucial to the entire social media sector.
The product charges 65 bps in annual fees. SOCL has company-specific concentration risk, putting more than 60% investment in its top 10 holdings. At the current level, SOCL carries a Zacks ETF Rank #3 (Hold) with a High-risk outlook (read: Snap Shares Slump on Weak Q3 Outlook: ETFs in Focus).
Investors should also note that Twitter shares occupy about 12.89% in MicroSectors FANG+ ETN (FNGS). The fund charges 58 bps in fees.
The in-focus Twitter takes the first spot of the fund Invesco S&P 500 Equal Weight Communication Services ETF (EWCO) with about 4.78% exposure. The fund charges 40 bps in fees.
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