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Twitter share price awaiting cues from upcoming Q1 earnings

On the back of improving ad spending environment, can Twitter’s Q1 results this week outperform market expectations?

When does Twitter report earnings?

Twitter is set to release its Q1 financial results on 29 April, after market close.

Twitter earnings – What to expect

Advertising services account for close to 90% of Twitter’s revenue, which saw a dip in 1H 2020 as businesses cut back on marketing spend in times of Covid-19. However, investors may note that on the back of improving economic conditions, advertising revenue had bounced back strongly in the later part of the year to the point of surpassing pre-Covid levels. This momentum may potentially continue into 2021, as global advertising spend are projected to increase further with improved business sentiments from ongoing vaccination and economic recovery.

That said, investors may keep a close watch for Twitter’s daily active users (DAUs) base after the figure missed expectations for the previous quarter. After a strong surge in Q2 2020, growth of DAUs seems to taper off as reopening and normalisation takes place. Twitter guided for DAU growth of approximately 20% YoY for the upcoming Q1 results. One to watch.

How to trade Twitter earnings

Twitter’s current forward P/E ratio stands at 65.1, commanding a premium over the technology sector average of 46.4. Its relatively high valuation may suggest that a high bar is set for outperformance in the upcoming Q1 results. Markets may be on the lookout for its user base growth and average revenue per user (ARPU), as key gauges for its growth momentum in times of ongoing normalisation.
Currently, the stock has 11 ‘buy’ recommendations, 24 ‘holds’ and five ‘sells’. The Bloomberg 12-month consensus target price of US$72.00 suggests a potential 7.9% upside from current price.

Twitter shares – technical analysis

Twitter’s price movement seems to be forming an inverse head and shoulders pattern after retracing from its all-time high of US$80.75 in February. Should prices continue to trend upwards in the near term, it may potentially find resistance at the neckline level of US$74.00. One to watch. Key support in the near term may be the US$64.00 level where prices remain supported on three occasions previously, followed by the US$60.00 psychological level.

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