Twitter Earnings Preview: Analysts Mixed, Most Looking At MAU Adds

Shares of Twitter Inc TWTR fell roughly 2 percent on Monday trading, ahead of the announcement of the company’s second quarter financial results, scheduled for after the market closes on Tuesday.

According to Estimize, experts are modeling consensus earnings of $0.05 per share (up 150 percent year-over-year) on revenue of $487.38 million, versus guidance of $477.5 million. Let’s take a look at what six major Wall Street research firms are saying before the earnings call.

SunTrust

SunTrust’s Bob Peck and his team are projecting below-consensus sales of $481 million for Twitter’s second quarter and maintain a Neutral rating and $40.00 price target on the stock.

The firm adjusted, on Monday, its core MAU net add growth estimate to be roughly flat, around 310 million total MAUs (302 million core and 8 million SMS Fast Followers), up from 308 million (302 million and 6 million) reported in the first quarter. The analysts point out that “the head line reported number may be confusing, as the company may not break out SMS users, leaving the core MAU growth in doubt,” and “implore management to break out the 2 pieces, at least for this critical period.”

The experts highlight that other metrics, like the quality of the user net adds and their engagement levels, are also important.

Deutsche Bank

For their part, Deutsche Bank’s Ross Sandler and his team recently reiterated a Buy rating and $60.00 price target on the stock. They noted that, while sentiment is quite bearish, reality doesn’t seem to be as bad.

The firm is anticipating MAUs of 312 million (304 million ex-SMS Fast Followers) and decent revenue. The note that “Twitter direct-sales continues to perform well for brand marketers, DR should be largely fixed by year-end, and SMB (mid-market) and International are outperforming.”

They add, “Looking closer at FY15, TellApart should help the revenue picture in 2H, hence we don’t expect a major revision. On the product side, ‘Moments’ (Project Lightening) looks promising early, and is running several events per day in many countries -helping traffic and eventually revenue.”

Earnings are expected to come in at $0.02 per share on sales of $479 million.

JPMorgan

JPMorgan is also positive on Twitter, and maintains an Overweight rating on the stock. The firm anticipates results in line with guidance but slightly below consensus. They expect revenue of $480 million and EBITDA of $99 million, noting that the company did not specifically guide to MAU net adds for the second quarter, “but maintained its cautious tone here on the CEO transition call.”

JPMorgan estimates 7 million MAU net adds, versus 15 million in the first quarter and 16 million in the second quarter of 2014.  

Canaccord

Also bullish on Twitter is Canaccord, which rates the stock a Buy and set a price target of $52.00. The firm is modeling earnings of $0.03 per share on sales of $480 million for the second quarter; both figures stand below the Street’s consensus.

Moreover, the experts note that “there could be a lag betweenproduct roll-outs and MAU growth.” Among recent initiatives, they think the Google Inc GOOGL GOOG tie-in “presents a good opportunity for user reacceleration. While the impact may be modest in the near term, we think it will improve over time,” they conclude.

Rosenblatt Securities

Rosenblatt’s Martin Pyykkonen is not as optimistic as his peers. He maintains a Neutral rating on the stock and his second quarter revenue estimate stands below consensus and the management’s guidance.

The analysts expects to see roughly 50 percent total revenue growth to $470 million, and an EBITDA margin of 22.4 percent. However, his focus this quarter will be put on “the interplay between MAUs and ad revenue monetization.”

Macquarie

Finally, Macquarie, which also maintains a Neutral rating and $40.00 price target, says Twitter is its least favorite name among Internet and video game publishers. They highlight the “management’s poor execution on user growth initiatives” and pressure in monetization.

The experts now anticipate sales of $482 million and EBITDA of $107 million. They conclude, “While we still believe that there is a meaningful long-term opportunity ahead for TWTR, it is not clear if the current strategy will enable the company to capitalize on this potential. With leadership at the top still unclear, at best a mixed record on execution, and a still-expensive valuation, we see little reason to get more constructive on the shares.”