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Video Push & New Features to Drive Twitter (TWTR) Q3 Earnings

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Twitter (TWTR - Free Report) is set to report third-quarter 2018 results on Oct 25.

The company’s earnings beat the Zack Consensus Estimate in three of the trailing four quarters, delivering an average positive surprise of 33.93%.

In the last reported quarter, Twitter posted non-GAAP earnings of 17 cents per share, which was in line with the Zacks Consensus Estimate but much better than 8 cents reported in the year-ago quarter.

Revenues of $711 million increased 24% from the year-ago quarter and beat the consensus mark of $700 million. Twitter’s adjusted monthly average users (MAUs) totaled 335 million, up from 326 million in the year-ago quarter but down 1 million sequentially.

The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $703.72 million, while that for earnings stands at 14 cents per share.

Let’s see how things are shaping up prior to this announcement.

New Features to Boost User Growth

Twitter continues to add features to attract users to its platform and drive engagement levels.

In the current quarter, the company announced “audio-only broadcast” option to expand its foothold into live podcasting and other audio-first content.

Twitter’s new Live Audio service reflects its focus on expanding its real-time content offering as competition intensifies from the likes of Facebook (FB - Free Report) , Snapchat and Facebook-owned Instagram.

Twitter, Inc. Price and EPS Surprise

Twitter, Inc. Price and EPS Surprise | Twitter, Inc. Quote

Video Push to Aid Ad Dollars

Twitter’s push into the video streaming segment will make its advertising business (84.5% of total revenues) even more lucrative. Especially, video ads, which accounted for more than half of ad revenues in second-quarter 2018, remained Twitter’s fastest-growing ad format.

The company locked deals with the likes of Activision (ATVI - Free Report) and Major League Baseball (MLB) to air live content on its platform. The deals are expected to boost engagement levels, thereby fetching ad dollars. This is likely to boost third-quarter 2018 revenues. Notably, Activision’s Overwatch League and MLB’s pre-game shows will be live streamed on the platform.

Additionally, Twitter announced deals with the likes of Sony Music, FOX Sports Asia and VICE to air “live-streaming and video highlights” content on its platform, which is expected to drive ad dollars.

In second-quarter 2018, advertising revenues increased 23% year over year to $601.1 million. Ad engagements increased 81% year over year.

For the third-quarter, the Zacks Consensus Estimate for advertising revenues stands at $592 million.

Focus on Security to Boost Investor Confidence

Twitter has ramped up its fight against fake news ahead of the 2018 US mid-term elections. Its new automated detection system continuously checks for “potentially spammy and automated accounts,” according to a Twitter blog post.

Twitter along with Apple, Alphabet’s (GOOGL - Free Report) YouTube and Facebook banned “conspiracy theorist” Alex Jones’ channels and related videos to make sure there is no manipulation of election results.

Twitter also noted that the number of spam-related reports it gets from users has declined on average. We believe the company’s recent efforts to fight against fake news will help it build trust and repair brand image, thereby improving user engagement.

For the third quarter, the Zacks Consensus Estimate for monthly average users (MAUs) is pegged at 330 million.

Twitter sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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