Earnings Edge: Social Media Juggernauts Report (FB & TWTR Analysis)
This week is jam-packed with corporate earnings.
We get reports from 170 of the S&P 500 companies over the next five days.
Electric vehicle juggernaut Tesla Inc. (Nasdaq: TSLA) kicks us off after the bell today with what is probably the highlight of the week.
It’s a high-profile stock that has done phenomenal over the last twelve months. Everyone will be watching it.
TSLA’s earnings report and how investors react will set the market’s tone over the next few days.
But it’s not the only one I’m keeping an eye on.
Two social media giants, Facebook Inc. (Nasdaq: FB) and Twitter Inc. (NYSE: TWTR), are set to report this week as well.
Both have benefited from a surge in time spent online since the pandemic began. But with the economy opening back up, we want to see the impact it is having.
Here’s what to watch during Facebook and Twitter earnings this week…
Earnings Edge Stock No. 1: Facebook
Earnings Announcement Date: April 28, after the close.
Expectations: Earnings at $2.35 per share. Revenue at $23.6 billion.
Average Analyst Rating: Buy.
Years ago, these two companies were battling. Who would pull off the trick of generating revenue from social media?
There’s one clear winner at this point: Facebook.
You don’t have to look past the expected revenue to understand why.
At $23.6 billion in expected ad revenue, it dwarfs Twitter’s $1 billion.
Now, Twitter might have more growth potential. But the reality is that Facebook found the magic formula for its platform and is off to the races.
To add to this winning formula, the price chart is in a strong uptrend as well. Take a look…
FB Is Trending in the Right Direction
The stock was trading in an ascending triangle pattern from September 2020 through March 2021. The breakout to the upside was extremely bullish. With the stock dipping lower before an earnings announcement, I wouldn’t be looking for shares to drop much further.
There’s always a concern of government regulation with the power of social media. But that shouldn’t come up this week.
The options market is pricing in a modest 3% move. That’s an easy hurdle for Facebook to top in one direction or the other when it reports on Wednesday.
Stock No. 2: Twitter
Earnings Announcement Date: April 29, after the close.
Expectations: Earnings at $0.14 per share. Revenue at $1 billion.
Average Analyst Rating: Hold.
Ok, so we know Facebook is winning the social media battle, but the little giant in Twitter can still stir things up.
Barely profitable and barely breaking a billion in revenues, Twitter is hoping to have figured out its own marketing strategies to create growth for the company.
How it is doing with a more robust spending platform now that the economy is coming back online will be something to keep a close eye on.
Many of us just assumed that social media did great during the pandemic because everyone was online. But, due to the economy being shut down, spending on marketing was way down. All the companies that depend on revenues from ads suffered, including Facebook and Twitter.
Shares have still rebounded from the pandemic lows nicely, but it’s time for these companies to deliver some upbeat data in their earnings.
You can see that Twitter traders are on hold. The stock is essentially at the same point it was on February 10, its last earnings report.
Shares popped double digits after that last earnings report. And I wouldn’t bet against the stock this time around.
TWTR Might Jump After Earnings
Even though it has bounced up and down and gone nowhere, you can see the green support line on the chart indicating a new uptrend for the stock.
As long as this holds, you don’t want to bet against it.
The market is expecting a little more movement on Twitter, pricing in a 5.2% move based on the weekly options prices.
A 5% move likely still keeps it riding that trend line if shares fall to the downside. If it’s an upward jump on earnings, then take that as great news and expect the stock to add more gains in the coming weeks.
Chad Shoop is a Chartered Market Technician and options expert for Banyan Hill Publishing. He is the editor of three leading newsletters: Quick Hit Profits, Automatic Profits Alert and Pure Income. His content is frequently published on Investopedia and Seeking Alpha. Check out his YouTube Channel to see his latest market insights.
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Investing has consumed my life since college. While double majoring in finance and economics at the University of North Carolina at Greensboro, I founded the university’s economics club, joined the finance club and participated in the Chartered Financial Analyst research competition to represent our school.