Twitter Inc. has a history of starting strong, and this year should be no exception.
The social-media company hasn’t had an easy time adding new users, but it tends to post its strongest user-growth numbers during the first few months of the year. That bodes well for the company’s Tuesday morning earnings report, according to Barclays analyst Ross Sandler.
Last year, Twitter TWTR, -0.03% added 6 million new monthly active users in the March period, the only quarter when it didn’t shed users. That more recent streak of losses is likely a big reason why the company is replacing its declining count of monthly users with a new metric, “monetizable daily active users,” or mDAUs, which is on a healthier trajectory. This will be the last quarter in which Twitter gives a count of its monthly active users alongside the new mDAU number.
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Though the way Twitter posts user numbers is starting to change, Sandler expects that the company will show off another strong winter quarter. He estimates that the company had 130 million mDAUs as of the end of March, up 4 million from the prior quarter. That would mark the company’s highest sequential additions in a year, as Twitter continues its efforts to improve the health of its platform.
Sandler, who rates the stock at underweight with a $27 target, expects to see some improvement in the financials as well. “Checks continue to indicate that Twitter is doing a much better job selling its mix of brand and performance in 2019,” he wrote. His main concern is that the company’s results will be compared with a tough benchmark, since Twitter benefited from the Olympics a year ago.
What to expect
Earnings: Analysts tracked by FactSet expect Twitter to report 15 cents a share in adjusted earnings, down from 16 cents a share last year. Twitter has beaten the FactSet earnings consensus in each of the past 17 quarters.
According to Estimize, which crowdsources estimates from hedge funds, academics and others, the average projection calls for 18 cents.
Revenue: The FactSet consensus calls for $774 million in revenue, while the Estimize consensus is for $780 million. Management’s forecast calls for $715 million to $775 million in revenue. A year ago, Twitter reported March-quarter revenue of $655 million.
Stock movement: Twitter shares have risen following five of the company’s last 10 earnings reports. The stock tends to swing wildly after earnings, recording double-digit moves following six of the last 10 reports. Shares have gained 8% over the past year, while the S&P SPX, +0.10% has risen 7%.
Of the 38 analysts surveyed by FactSet who follow Twitter, 10 have buy ratings, 22 have hold ratings, and six have sell ratings. The average price target is $32.90, 4.5% below recent levels.
What else to watch for
Twitter spooked investors on its last conference call when it warned of heavy spending for the rest of the year, but the company may have just been setting a low bar for itself.
Evercore ISI’s Anthony DiClemente sees room for the company to come in below his “conservative” forecast of 27% operating-expense growth for the first quarter, and he said a positive surprise on this metric could help drive shares higher.
“With expectations reset, a strong [first quarter] should inspire confidence in full year execution,” wrote DiClemente, who rates the stock at in-line with a $36 target.
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In conjunction with expense growth, a key focus for Instinet’s Mark Kelley will be hiring trends at Twitter. The company grew head count by 16% last year, mainly due to new engineering hires, and management disclosed on its last conference call that Twitter would continue to add new positions.
Kelley, who rates the stock at neutral with a $31 target price, will also be looking for momentum with new ad products. The company, which saw a 27% increase in click-through rates last quarter and a 33% bump in impressions, has been making some progress with newer video-ad formats, including video app cards, which promote mobile apps.
Analysts surveyed by FactSet are calling for a 15% rise in overall advertising revenue, to $661 million.
A previous version of this article had an inaccurate Twitter price target from Instinet analyst Mark Kelley, it has been updated.
