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Twitter Tanks on Q3 Earnings: What's in Store for ETFs?
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The social media space is in bad shape with Twitter Inc. reporting mixed third-quarter 2020 results in late hours on Oct 29. Shares tumbled 21.1% in the key trading session of Oct 30.
Twitter reported third-quarter 2020 adjusted earnings of 4 cents per share that missed the Zacks Consensus Estimate by 33.3% and declined 20% year over year. What pissed off investors’ mood even more was slowing user growth.
Average U.S. mDAU was 36 million, higher than 30 million in the year-ago quarter and flat sequentially. Average international mDAU was 152 million compared with 115 million in the year-ago quarter and 150 million in the previous quarter. Twitter’s total mDAUs in the quarter fell shy of analysts’ expectations of 195 million mDAUs for the third quarter.
However, revenues of the company increased 14% year over year to $936 million attributable to a global, broad-based recovery in advertising revenues and beat the Zacks Consensus Estimate by 19.1%. Twitter ad revenues grew 15% year over year to $808 million, according to the report, with total ad engagement growing 27% over the same period. The return of live events and previously postponed product launches led to the ad revenue gains.
What Lies Ahead?
While the reason behind the slump in shares in slowing user growth, the quarterly growth in mDAUs still marks a year-over-year increase of 29%. So, 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.
Twitter has a Zacks Rank #2 (Buy). 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.
ETFs in Focus
Twitter’s results will likely have a considerable impact on Global X Social Media ETF (SOCL - Free Report) . Twitter takes about 7% of SOCL, holding the top position. As a result, the company’s performance is crucial to the entire social media sector. The fund lost about 5.3% on Oct 29.
The product charges 65 bps in annual fees. SOCL has company-specific concentration risk, putting more than 60% investments in its top 10 holdings. At the current level, SOCL carries a Zacks ETF Rank #2 (Buy) with a High-risk outlook. The fund was down 5.3% on Oct 29.
Another ETF that will be impacted by Twitter’s earnings is Invesco Dynamic Media ETF . Twitter takes about 5.25% of the fund, which lost about 3.4% on Oct 25.
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Twitter Tanks on Q3 Earnings: What's in Store for ETFs?
The social media space is in bad shape with Twitter Inc. reporting mixed third-quarter 2020 results in late hours on Oct 29. Shares tumbled 21.1% in the key trading session of Oct 30.
Twitter reported third-quarter 2020 adjusted earnings of 4 cents per share that missed the Zacks Consensus Estimate by 33.3% and declined 20% year over year. What pissed off investors’ mood even more was slowing user growth.
Average U.S. mDAU was 36 million, higher than 30 million in the year-ago quarter and flat sequentially. Average international mDAU was 152 million compared with 115 million in the year-ago quarter and 150 million in the previous quarter. Twitter’s total mDAUs in the quarter fell shy of analysts’ expectations of 195 million mDAUs for the third quarter.
However, revenues of the company increased 14% year over year to $936 million attributable to a global, broad-based recovery in advertising revenues and beat the Zacks Consensus Estimate by 19.1%. Twitter ad revenues grew 15% year over year to $808 million, according to the report, with total ad engagement growing 27% over the same period. The return of live events and previously postponed product launches led to the ad revenue gains.
What Lies Ahead?
While the reason behind the slump in shares in slowing user growth, the quarterly growth in mDAUs still marks a year-over-year increase of 29%. So, 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.
Twitter has a Zacks Rank #2 (Buy). 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.
ETFs in Focus
Twitter’s results will likely have a considerable impact on Global X Social Media ETF (SOCL - Free Report) . Twitter takes about 7% of SOCL, holding the top position. As a result, the company’s performance is crucial to the entire social media sector. The fund lost about 5.3% on Oct 29.
The product charges 65 bps in annual fees. SOCL has company-specific concentration risk, putting more than 60% investments in its top 10 holdings. At the current level, SOCL carries a Zacks ETF Rank #2 (Buy) with a High-risk outlook. The fund was down 5.3% on Oct 29.
Another ETF that will be impacted by Twitter’s earnings is Invesco Dynamic Media ETF . Twitter takes about 5.25% of the fund, which lost about 3.4% on Oct 25.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>