Twitter 2Q Earnings due BEFORE US Mkt Open

Twitter 2Q Earnings out BEFORE US Mkt OpenToday 

Recent hacks, potential subscription business, activist investors…

• We highlighted some of the earnings due this wk on Mon’s note (note some of the dates have changed, importantly Amazon is now due on 30 Jul Aft-Mkt)
  
  
• As part of QBing for the SaxoStrats Squad & meeting the requests of our excellent Global Sales trading team (Bring out “The Oak”), KVP will be highlighting a few key names this earnings season. We touched on Tesla yest & they delivered after the US market close with a big beat +$2.18a vs. -$0.37e, Revenue also beat at +$6.04bn vs. expectations of +$5.09bn
  
  
• Whilst stock closed yest at 1592, +1.53% on the day (remember Mon has a +9.5% spike, which saw a -4.5% pullback on Tues), in the after mkt the last print was 1657 which is c. +4% of Wed’s 1592 close. Depending on where we open, today could be an new ATH in the name that may eclipse the $1795 lvl that was kissed earlier on this month.
  
  
• Anyhow onto twitter, twitter, twitter…
  
  
• TWTR’s 2Q earnings will be out today BEFORE the US session start. Twitter has been the problem child of the social media listed names, at least performance & advertising wise vs. the likes of Zuk’s book (FB), U-Tube (Goog), Instagram (FB), Linked-In (MSFT), Snap (SNAP)… whilst paradoxically also the most revered… be it regional & social phenomena like the Arab Spring to Trumpian & Elon Tweets, to brilliant minds exchanging ideas, to millions of virtue signalers & keyboard basement warriors, to toxic trolls & proponents of everything evil & hateful in this world.
  
  
• It has been a challenge of monetizing its users, whilst continuing to grow its user base vs. ever increasing competition across platforms in the global social media eco system. All this whilst actually pioneering a more active & ethical stance towards taking responsibility for the content on their platform vs. say Zuk’s Book (FB).   
  
  
• Lets take a look at the top & bottom line expectations before settling on the most likely factors to focus on the results today.
  
  
• Consensus 2Q Preview from Bloomberg is for -$0.012 EPS Adj., with Rev of $705M
  
  
• In regards to overall industry focus, there are big concerns over some of the advertising boycotts across social media from companies whose customers don’t want to see the unregulated media companies operate with very little policing of the content on their platforms. This can be as microscopic as niche hate groups, to macroscopic to political messages that sway voters (without them realizing it) towards making certain decisions.
  
  
• For too long, the tech companies have had the best of both worlds – product reach & a lack of need for regulation for the content on their site (i.e. not need for the costs & infrastructure that comes with filtering, monitoring & also balancing the constant flow of content). This is a structural problem that is not going away anytime soon, the net question obviously for shareholders is what is the bottom line effect on advertising revenue?
  
  
• More specifically to the company there will be two things front & center. The first will be the recent hack, that saw prominent accounts (Obama, Gates, Elon, KVP – ok not KVP) in essence sending out tweets linked to a classic scam & also lead to Twitter having to shut down thousands of accounts to get to the bottom of the hole in their system.
  
  
• More importantly will be their signaled intent to potentially have a separate subscription model. A cancellation of this idea, would likely be a clear negative. Whilst a green light, we will learn from the hacking event, etc… will be positive. At the end of the day, there is a clear need for a subscription like model, there is a market for a more filtered, higher signal to noise version of twitter. Question of course is how big is that, how does that ecosystem look like, is it ad free or not, etc.
  
  
• A few other underlying trends continue, Jack Dorsey as CEO… seems to continue to divide folks as to whether the co-founder has overstayed or is best placed at the helm. As well as the activist HF Elliot, that has a +$1bn stake in the company, that initially tried to force out Jack.
  
  
• Lastly, there is always the perpetual question of – why doesn’t an amazon, google, tencent, apple, softbank, Russian Shell-Company or Microsoft buy the company? At barely $30bn mkt cap, “only” up +15% YTD this is chump change for these companies.
  
  
• KVP used to postulate that the most gangster of moves, would have been Bezos buying twitter & switching off Trump’s account… alas, that drama will have to unfold in another universe.
  
  
• At the very least, with the countdown to the Nov 3 US elections, the Twitter-verse will stay busy. And in a Biden presidency, will be less entertaining. One key thing that trump pioneered – that he will obviously never get the credit for – is that direct communication to the world, that will overtime become the norm for global leaders, CEOs & other limelight executives.

• Here is the link to their Q1 2020 Earnings Transcript.  

Start-to-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.

This is the way

KVP