U.S. Markets closed

Twitter Earnings Preview: What to Expect (Update 1)

Chris Ciaccia

Updated from 9:15 a.m. to include thoughts from Merill Lynch analyst.

NEW YORK (TheStreet) -- Twitter  is expected to report its first earnings report Wednesday after the close of trading. At this stage, it's a wild card on what to expect, and it's time to place your bets -- in 140 characters or less.

Twitter shares have had a strong run since going public, gaining nearly 50% since the initial public offering in November. The company has been busy signing and announcing deals since going public, including ones with the NFL, CBS and others to try to boost engagement and monthly active users (MAUs).

TWTR data by YCharts

When Twitter went public, it only had 231.7 million users, a lower number than many thought, especially compared to Facebook , which has well more than 1 billion users. CEO Dick Costolo, who uses the handle @dickc, has been largely pretty quiet since the IPO, but is working hard to boost the company's MAU and to show Wall Street that the San Francisco-based service is more than just a niche product.

Twitter is still in investment mode, and isn't expected to earn a profit any time soon, which might otherwise derail the company's growth plans. Analysts surveyed by Thomson Reuters are looking for Twitter to lose 2 cents a share in the fourth quarter on $217.8 million in sales.

Analysts will be looking for clarity on how well the company's three main products -- promoted tweets, promoted accounts, and trends  -- are doing. We've heard several advertisers (including TheStreet) say there have been mixed results with the

Here's what several analysts on Wall Street had to say going into the report:

Wedbush Securities analyst Shyam Patil (Neutral, $58 PT)

"Our checks pointed to a very strong 4Q with rising average spend per campaign. Feedback suggests that Twitter is still an experimental part of budgets and generally gets bundled into a large package for social buys vs. Facebook, which is starting to get its own line item. There are some specific advertisers, however, who have a dedicated Twitter line item; in one case, we heard of a global marketer whose budget for Twitter is larger than that of Facebook. Our checks indicate the strong momentum has continued into 1Q and
commentary suggests that Twitter budgets could at least double in 2014, as the advertising platform matures, new products (such as tailored audiences, Amplify) gain traction and analytics/measurability improve."

Cantor Fitzgerald analyst Youssef Squali (Sell, $32 PT)

"We're modeling for ad growth of 115.3% Y/Y, to $214.1M in 4Q:13, representing only slight deceleration from the +123.5% Y/Y growth reported in 3Q:13. Considering FB's
4Q:13 results, which showed accelerating ad revenue growth (76% Y/Y vs. 66% in 3Q:13), we may see a similar pattern out of TWTR. As social media spend continues to take share of integrated ad budgets and as more marketers gain comfort with new platforms, we expect this strong growth to continue in 2014 (+102.5%) and beyond (51% 5-year CAGR, by our estimate)."

JPMorgan analyst Doug Anmuth (Neutral, $40 PT)

"We expect solid results in Twitter's first quarter reporting as a public company. We forecast 4Q13 revenue to grow 86% Y/Y and 24% Q/Q to $209M, comprised of $196M in Advertising (+97% Y/Y, +28% Q/Q) and $13M (+2% Y/Y) in Data Licensing. Twitter reported Y/Y revenue growth of 105% in each of the last two quarters, and our estimates would suggest some deceleration, but we believe upside to our numbers is likely given increasing traction with advertisers, new ad products, a likely IPO-driven user bump in the quarter, and the broad trend of ad dollars moving toward mobile newsfeed and native advertising as shown in Facebook's strong 4Q results. We continue to believe Twitter is fundamentally changing the way people communicate and consume information, and the company is in the early stages of monetization with considerable runway ahead, but we believe shares are more than fairly valued at current levels."

FBN Securities analyst Shebly Seyrafi (Sector Perform)

"We reiterate our Sector Perform rating on TWTR and see upside to our FQ4 estimates after it reports results (Wed., Feb. 5 ATM). Recent results from fellow online advertising peers FB and GOOG bode well for TWTR. We think that key investor focal points will be monthly active user (MAU) growth, engagement rate (Timeline Views/MAU) growth, and monetization
(advertising revenue per 1,000 Timeline Views) growth. As the table below shows, we are modeling MAU growth of 36%, engagement rate growth of 10%, and monetization growth of 36%. A key concern in our initiation was that engagement rate growth has been decelerating (from 30% in FQ1 to 8% in FQ3), but we think that the recent exposure from its IPO should help engagement rate and MAU growth."

Bank of America Merill Lynch analyst Justin Post (Underperform, $36 PT)

"Twitter reports 2/5 and we think it could beat vs our and the Street's estimates. Cutting through the core and upside case estimates, we think stable to accelerating user (vs
39% in 3Q) and/or ad revenue (vs 123% in 3Q) growth will be received favorably, while a large deceleration will raise concerns. In addition to user and usage trends, new ad
format/ad targeting commentary and outlook for 1Q revenue growth most important for call, in our view. We anticipate a 1Q guide, but don't know if Twitter will guide the year (if
Twitter does guide the year, we would expect conservatism)."

-- Written by Chris Ciaccia in New York

>Contact by Email.