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Will Twitter ETFs Be Able to Impress Investors in Q1?

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Social media earnings should be on high alert this season thanks to the selloff in March. Talks of stringent regulations on social media after news of Facebook data breaches must have made investors vigilant over it.

Against this backdrop, Twitter Inc. will report its Q1 earnings on Apr 25 before the opening bell. Expectations must have been high on the micro-blogging site as it delivered a blockbuster Q4 by reporting GAAP profitability for the first time (read: Log In to Social Media ETFs on Twitter's Strength).  

According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Surprise Prediction

TWTR has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of +12.50%. A positive ESP enhances our surprise prediction power and gets a boost from a favorable Zacks Rank.

The stock comes from a top-ranked Zacks industry (top 43%) and sector (top 31%). The company beat earnings estimate in the trailing four quarters, yielding an average surprise of 153.10%.

Though there was a bloodbath in the social media space in March, no changes were noticed in estimate revisions for the two upcoming quarters in the last seven, 30 and 60 days. Year-over-year growth in earnings estimate is 9.09% for the current quarter and 62.50% for the next quarter.

Last Quarter Was Upbeat

On Feb 8, the company reported fourth-quarter 2017 non-GAAP earnings per share of 19 cents, which came ahead of the Zacks Consensus Estimate of 14 cents and increased 72.7% year over year.

Revenues of $732 million increased 2% from the year-ago quarter and beat the consensus mark of $690 million. In fourth-quarter 2017, Twitter’s adjusted monthly average users (MAUs) totaled 330 million, flat sequentially but up 4% year-over-year basis. Video ads continue to be the key driver. In a nutshell, investors’ focus will be on the company’s user and revenue growth and its impact on the bottom line.

ETFs in Focus

Twitter’s results will likely have a considerable impact on Global X Social Media ETF (SOCL - Free Report) . Twitter takes about 14.5% of SOCL, holding the top position. As a result, the company’s results are crucial to the entire social media sector.

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 #3 (Hold) with a High-risk outlook (read: 5 Hottest Tech ETFs of 2017).

Another ETF that will be impacted by Twitter’s earnings is AdvisorShares New Tech And Media ETF . Twitter takes about 4.8% of the fund.

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