Twitter TWTR reported third-quarter 2021 adjusted loss of 54 cents per share in contrast to the Zacks Consensus Estimate of earnings of 17 cents per share. The company had reported earnings of 19 cents per share in the year-ago quarter.
Revenues increased 37% year over year to $1.28 billion that missed the Zacks Consensus Estimate by 0.3%. Strength in brand advertising as well as accelerating year-over-year growth in Mobile App Promotion (MAP) revenues aided growth. In response to downbeat earnings, the stock lost about 10.8% in the key trading session on Oct 28.
Per the company, the impact of Apple’s AAPL iOS 14.5 privacy change was less than expected in the third quarter and will be modest in the fourth quarter. Earlier this year, Apple introduced a major privacy feature called App Tracking Transparency (ATT) that allowed users to opt out of third-party app tracking. This means apps can no longer collect data about users from third parties and use that data to better target them with ads unless a user specifically gives the app permission to do so.
Analysts’ Downbeat View
KeyBanc Capital Markets said, based on those numbers, that the company will not be able to achieve its stated goal of 315 mDAUs by the end of 2023. The firm cut its price target for Twitter from $81 a share to $70, as quoted on CNBC.
“Twitter needs to materially reaccelerate U.S. and international growth,” to reach its target, wrote analysts at KeyBanc wrote in a note to investors. They still have a buy rating on the stock, the article noted.
Some analysts still fear that Twitter may face the brunt of Apple’s iOS 14.5 privacy change policy. Jefferies mentioned that “the continued uncertainty from the iOS changes” as a reason to slash its price target on the stock to $70 from $80, per the same CNBC article.
Time for Social Media ETF?
Gutsy investors can use the recent selloff as a buying point and cautious investors may wait for some time and look for better entry points. The company’s long-term prospects look positive though short-term hurdles exist. If an investor finds it too risky to bet on Twitter now, the ETF route can be taken as the basket approach lowers company-specific concertation risks.
ETF in Focus
Twitter’s results will likely have a considerable impact on Global X Social Media ETF SOCL. Twitter takes about 6.25% of SOCL, holding the fifth position. Investors should note that SOCL puts 11.68% on Facebook (FB), which has come up with upbeat earnings this season.
The fund also has presence in Alphabet with 6.55% weight. Since the fund holds such outperformers like Alphabet in its kitty, investors can use the Twitter-induced selloff as an entry point to SOCL. The product charges 65 bps in annual fees. SOCL has company-specific concentration risk, putting more than 60% investments in its top 10 holdings.
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