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The Ratings Game: Twitter earnings underscore need for Elon Musk to take ‘more short-term risks,’ analyst says

Elon Musk’s bid for Twitter Inc. is generating all the buzz, overshadowing everything else, including mixed financial results early Thursday that underline an urgency for change at the company, financial analysts contend.

“Most important, as a private company, Twitter should pursue platform initiatives and investments with an eye toward the longer-term; this should include taking more short-term risks that might be difficult under public investor scrutiny,” Colin Sebastain of Baird Equity Research wrote Thursday, hours after Twitter
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reported first-quarter results. Sebastain believes Twitter will “forsake” some ad revenue to open up the platform to more content, some of it objectionable, via a subscription model.

See also: Elon Musk has a deal to buy Twitter at $54.20. Should you buy it cheaper now and make a tidy profit? Proceed with caution, experts say.

The contours of Twitter results — better-than-expected net income of $513 million, or 61 cents a share, on lackluster revenue of $1.2 billion — were buttressed by user gains that potentially benefited from Russia-Ukraine events. [Results included a restatement of monthly daily active users tied to a feature allowing multiple accounts.]

The healthy profit should also allay worries about Twitter’s financial standing as Musk moves inevitably to a proposed $44 billion acquisition.

“Overall, Revenue came in a tad soft, but this is as expected given the series of macro & geopolitical headwinds that are well flushed out by the EPS season thus far,” Evercore ISI analyst Mark Mahaney said in assessing results Thursday. 

But analysts expecting any more details on Twitter’s future were left with more questions than answers. Feeding the uncertainty, there was no conference call, shareholder letter or guidance — understandable, given the pending Musk acquisition.

“While we were confused by the late release of earnings results this morning and the lack of a conference call, it probably made sense given the circumstances,” Piper Sandler analyst Thomas Champion said in a note Thursday.

The lasting legacy of Twitter’s quarterly results Thursday is most likely a swan song as a public company before Tesla Inc.
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Chief Executive Musk takes it private and opens its platform to a cacophony of voices, should his proposed bid succeed.

“We believe Twitter stock has disconnected from fundamentals and a more relevant question is the price Mr. Musk pays for the asset,” Champion wrote. “For next steps, we will monitor the drip of regulatory filings. With a Merger Agreement filed, we expect a preliminary Proxy in late May, a definitive version in July, which would set the table for a shareholder vote in the August time frame.”

Twitter’s stock is up about 2% in early afternoon trading Thursday.

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