Earnings season continues in full force this week as nearly one-third of the Standard & Poor's 500, or about 160 companies, are due to report results, including social media giants Facebook Inc., Twitter Inc. and LinkedIn Corp. Analysts now expect overall earnings from S&P 500 companies to dip 0.3 percent, compared with the 3 percent decline expected at the start of July, according to Thomson Reuters data.
About 200 companies in the S&P 500 have reported earnings so far, and roughly 72 percent of them have beat Wall Street estimates, according to S&P Capital IQ.
Following the closing bell Tuesday, Twitter is scheduled to post results for the April-June quarter after CEO Dick Costolo stepped down on July 1. The former chief executive faced tough shareholder questions about slowing user growth.
Twitter reported 302 million active monthly users for the first quarter of 2015, up 18 percent from 255 million a year earlier. But the gains pale in comparison to Facebook, which has more active monthly users than Twitter and LinkedIn combined. Facebook announced in April that it officially has more monthly active users (1.44 billion) than China has people (1.4 billion).
Twitter needs to demonstrate it can grow users and monetize them in a positive fashion compared to their competitors, says James Gellert, chairman and chief executive officer at Rapid Ratings International Inc. “Whether they like it or not, Facebook is the competitor people look at for social media and advertising, and Facebook is doing a really great job,” Gellert said.
Adam Sarhan, founder and chief executive officer of Sarhan Capital agrees, saying Facebook’s stock is well positioned to continue its upward trajectory. “Facebook is firing on multiple cylinders,” said Adam Sarhan, founder and CEO of Sarhan Capital. “There’s huge growth potential for the company, and that’s why investors are paying up.”
Here’s a deeper look at the social media companies reporting this week.
Although Twitter Inc.'s (NYSE:TWTR) quarterly profit beat estimates in the first quarter of 2015, revenue and mobile monthly active users both missed forecasts. The company also cut its earnings outlook for 2015.
In parallel, Twitter has made an aggressive bet on video through applications like Vine and the recently acquired Periscope, which allows users to stream live videos from their mobile phones. Other acquisitions during the second quarter include TenXer, a collaboration platform; TellApart, an advertising-sales solution; and Whetlab, a machine learning startup.
Wall Street projects Twitter is to report a fiscal second-quarter loss of $177.3 million, or earnings per share of 27 cents, on revenue of $481.3 million, according to analysts polled by Thomson Reuters. That compares with a loss of $144.6 million, or earnings per share of 24 cents, on revenue of $312.2 million a year ago.
Shares of the company have lost nearly 17 percent of their value since Twitter's initial public offering on Nov. 7, 2013.
Shares of Facebook Inc. (NASDAQ:FB) hit another an all-time high last week after the company leapfrogged over U.S. multinational conglomerate General Electric to make it the eighth most valuable company in the Standard & Poor’s 500 index. The Menlo Park, California, company is currently valued at around $267 billion, above General Electric Company ($261 billion) and JPMorgan Chase & Co. ($251 billion).
Facebook joined Apple Inc., Microsoft Corporation and Google Inc. on the list of most-valued companies, after knocking Wal-Mart Stores Inc. out of the top 10 highest-valued companies in the S&P 500 in June.
The company is forecast to report fiscal second-quarter net income of $666.3 million, or earnings per share of 24 cents, on revenue of $3.9 billion, compared with a profit of $791 million, or earnings per share of 30 cents, on revenue of $2.9 billion a year ago.
Shares of Facebook have gained approximately 25 percent in the last 12 months.
Professional networking company LinkedIn Corp. (NYSE:LNKD) slashed its full-year forecast, citing lower demand for advertising. The company said spending on display ads fell 10 percent in the first three months of the year.
The company’s hiring subsidiary Talent Solutions, which accounts for 62 percent of LinkedIn’s total revenue, saw its revenue rise 36 percent in the quarter ended March 31. The Mountain View, California, company cut its full-year outlook, forecasting a profit of $1.90 per share, excluding items, on revenue of about $2.90 billion, down from a previous forecast for earnings of $2.95 per share on revenue of $2.93 billion to $2.95 billion.
LinkedIn is forecast to report a fiscal second-quarter loss of $133.02 million, or earnings per share of $1.23, on revenue of $679.96 million, compared with a loss of $1.03 million, or earnings per share of 1 cent, on revenue of $533.88 million a year ago.
Shares of LinkedIn have rallied 24 percent during the last 12 months.