US market open dependant on jobs report. Twitter, LinkedIn shares set to jump
01:00, 06 februari 2015
· Av CMC Markets
US markets again have the support of higher oil prices on Friday but whether stocks will follow-through in the same direction will largely rest on the result of January’s unemployment report.
The expectation is for a slight dip to the creation of 236K jobs in January, a natural seasonal drop from the peaks seen before the holiday season and well in line with a strengthening US labour market.
There have been some signs of a slowdown in manufacturing thanks to slower capital spending in the US shale oil industry but with strikes taking place there appears to have been minimal cuts made in the employment of oil-workers.
The better than forecast December 5 and January 9 NFP reports both preceded at least a 300 point drop in the Dow Jones Industrial Average so there are distinct risks for stocks heading into this report, especially if the number comes in higher than 236K.
Twitter shares look to open as much as 10% higher on Friday despite a further slowdown in user growth as fourth quarter profit and revenue beat expectations and the company forecasted higher user growth in the coming year.
Embattled CEO Dick Costolo also confirmed the reported tie up between Twitter and Google to give Google access to internal systems to allow Tweets to more easily appear in search results and so make them available to a wider audience.
The issue of user growth is still a thorny one for Twitter; it’s a fairly direct relationship that’s been proven by Facebook; the more users the more advertising revenue. Monthly active user growth has declined in every quarter of 2014 so if that trend continues; 2015 could even see the number of users drop.
The reason the Google agreement as well as the partnerships with third parties including Yahoo! Japan and Flipboard are significant is that it allows Twitter to refocus investor attention away from Twitter’s own users and towards its part in the wider internet. If Twitter can prove it can generate ad revenue from Tweets used outside of Twitter by non-users, suddenly user growth is not such an issue.
The reason Dick Costello has come in for so much stick is that Twitter has massive potential but it doesn’t quite seem to be capitalising on it so far. The impressive profit and revenue increases this quarter are a testament to Twitter’s ability to monetise it’s ecosystem but while user growth lags and the third party partnerships are unproven; the potential earnings growth is limited.
The growth in its hiring business including a big increase in overseas business drove up quarterly revenue at LinkedIn by 44% and is set to send shares up as much as 8% at the open of US trading. LinkedIn have also forecasted higher profits than analyst estimates for 2015.
LinkedIn have carved out a monopoly in the arena of professional social networks where not only in the west but now in Asia it’s becoming almost essential to have a profile for recruiting or to be recruited.
Futures suggest the:
S&P 500 will open 2 points lower at 2,060 with the
Dow Jones expected to open 28 points lower at 17,856 and the
Nasdaq 4 points lower at 4,252.
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