Twitter Q4 preview: Where next for Twitter stock?

When will Twitter release Q4 earnings?

Twitter will publish fourth quarter and annual results for 2021 before the markets open on Thursday February 10.

Twitter Q4 earnings preview

We have already seen many of Twitter’s competitors – including Meta, Snap and Pinterest – report earnings, which has highlighted several major headwinds facing the industry, with some proving to be more effective in navigating the tough environment than others.

Meta, the owner of Facebook, WhatsApp and Instagram, fared the worst after seeing $267 billion wiped-off its value since releasing quarterly results last week. That revealed user growth has stalled and that advertising income – the social media industry’s bread and butter – suffered thanks to the latest privacy changes introduced by Apple last year as well as a slowdown in demand from businesses because of supply chain problems.

The poor results and disappointing outlook weighed heavily on other social media stocks such as Snap and Pinterest, but both quickly rebounded after posting better-than-expected results. Snap, the owner of Snapchat, is proving far more popular with younger audiences than Meta and user growth has surpassed 20% for five consecutive quarters. Snap also enjoyed its first-ever profitable quarter. Meanwhile, Pinterest revealed it lost users in 2021 but blamed changes Alphabet’s Google made to its algorithms, but softened this blow by reporting record revenues and celebrating its first full year of profit.

That sets a tough scene for Parag Agarwal, Twitter’s chief technology officer that was promoted to CEO last November to replace founder Jack Dorsey. This will be his first set of results in the driving seat and an opportunity to stamp his authority on the business.

Twitter is less exposed to the privacy changes made by Apple compared to the likes of Meta or Snap, which rely more on direct-response ads that try to encourage people to take instant action. However, direct-response ads are an integral part of Twitter’s strategy considering it is looking to make significantly more income from them going forward. Twitter said in the last quarter that Apple’s changes were having a ‘modest impact’ on the business but its results came in better than expected, alleviating fears. Google’s tweaking of its algorithms also shouldn’t pose a threat.

Wall Street forecasts Twitter will have added 6.4 million users in the last three months of 2021 to end the year with 217.4 million Daily Active Users (DAUs) compared to the 192 million DAUs it had at the end of 2020. If achieved, that would represent the third consecutive quarter of faster year-on-year growth in DAUs, although still slower than the growth experienced last year when people were stuck at home during lockdown and spending more time on their phones.

The main challenge for the new CEO is to revive growth in North America. For context, Twitter added just 1 million users in the region during the year to the end of September compared to the 22 million new users it attracted around the rest of the world. Engagement also remains under the spotlight as Twitter continues to invest in turning conversation on the platform to new topics besides the likes of news and sports that can often dominate feeds and introduce new features to improve engagement and collect the data it needs to offer more direct-response ads to advertisers.

Analysts believe Twitter will report a 23% year-on-year rise in revenue to $1.60 billion – at the very top-end of Twitter’s guidance - and post operating income of $171 million, which sits at the upper-end of the company’s target range. That would be down from the $252 million profit booked the year before as it comes up against a tough comparative period that saw last year’s figure benefit from increased spending around the US elections, but will be a welcome return to the black after Twitter briefly slipped into the red during the third quarter when it posted a hefty $743 million loss.

Twitter has said it will provide its first glimpse into what to expect from its financial results in 2022 when it releases quarterly earnings this week, placing the outlook under the spotlight, especially given the series of headwinds facing other social media platforms. The company has already warned it will lose around $200 million to $250 million in revenue in 2022 after selling ad technology business MoPub for over $1 billion.

Wall Street currently forecasts Twitter can deliver 20% revenue growth in 2022 to $6.1 billion and return to operating profit of $170 million from the $371.4 million loss pencilled-in for 2021.

Investors will also want to see its longer-term goal to deliver at least $7.5 billion in annual revenue in 2023 reaffirmed.

Where next for TWTR stock?

Twitter shares have been trending lower for over three months and hit a 20-month low of $32 in late January, which proved to be a floor for the stock on several days and low enough to attract buyers back into the market.

The fact this floor has been unsuccessfully tested on five occasions in the past two weeks alone suggests it is a strong level of support for the stock. Still, with the RSI remaining bearish and supported by the state of the moving averages – with the 50-day below the 100-day sma, which in turn is below the 200-day – there could still be room for the current downtrend to continue. A break below the current floor of $32 could be significant considering the next level of support is closer to $27 – and beyond there the stock becomes vulnerable to the pandemic-induced lows hit back in March 2020.

Shares have not come close to recapturing the 50-day sma since the current downtrend started, so this is the first level it needs to hit in order to break the current trend and signal a move higher toward the 100-day sma at $49 and then the 200-day at $56 to recoup the losses it has suffered over the last three months.

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