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User Base Expansion to Aid Twitter's (TWTR) Q4 Earnings

Zacks Equity Research

Twitter Inc. TWTR is set to report fourth-quarter 2018 results on Feb 7.

The company beat the Zacks Consensus Estimate in three out of the trailing four quarters, delivering average positive surprise of 29.8%. In the last reported quarter, the company’s earnings of 21 cents per share surpassed the Zacks Consensus Estimate by 7 cents and increased 110% year over year.

Revenues increased 28.6% year over year to $758.1 million and came ahead of the Zacks Consensus Estimate of $704 million.

The Zacks Consensus Estimate for fourth-quarter earnings has declined 3.8% in the past 30 days to 25 cents per share. Earnings are estimated to increase 31.6% year over year. Further, the consensus mark for revenues is pegged at $871.6 million, up roughly 19.1% from the year-ago quarter.

Let’s see how things are shaping up for the upcoming announcement.

Twitter, Inc. Price and EPS Surprise

 

Twitter, Inc. Price and EPS Surprise | Twitter, Inc. Quote

Security Measures to Boost User Base

Security has become a major focus for Twitter. The company has taken a number of initiatives to eradicate fake news and plug the loopholes in the platform’s security system.

Twitter not only improved the sign-up process but also audited existing accounts for signs of automated sign-up in the quarter under review.

The company removed accounts and fake pages ahead of elections in Bangladesh. Additionally, Twitter suspended accounts that were found to be impersonating Russian president Vladimir Putin. Additionally, to curb the proliferation of fake news on its platform Twitter removed several Alex Jones and Infowars accounts.

Notably, Twitter announced a new dashboard for enhanced political ad transparency, ahead of general elections in India.

These efforts will surely help Twitter build trust and repair brand image, thereby improving user engagement.

Notably, in third-quarter 2018, Twitter’s adjusted monthly active users (MAUs) totaled 326 million, down from 330 million in the year-ago quarter. On the back of concerted “health efforts” to minimize suspicious new accounts, the company witnessed a quarter-over-quarter decline of 20% in successful sign-ups.

The Zacks Consensus Estimate for MAUs in the to-be reported quarter is pegged at 319 million, indicating decline of 3.3% year over year.

New Designs & Features

Twitter announced that it is experimenting with a new design aimed at making the application more interactive for its users, which includes color-coded replies and Facebook- like status update. The company launched a feature displaying the source of users' tweet, Twitter’s iOS or Android apps or a third-party service.

Twitter also rolled out a new feature with which users can see the most recent tweets first instead of the most popular.

The company also made changes in its Explore Tab for iOS, making it convenient for users to sort trending tweets by topic. This update is aimed at enhancing user engagement and not making users sit through topics, which they are not interested in.

Twitter continues to improve detection techniques and enhance the use of APIs to pave the way for an environment enabling healthy public conversation on its platform. Notably, the company’s effort to revamp its app is expected to aid the company in luring users and in turn boosting its ad-dollars.  
    
What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Twitter has a Zacks Rank #1 and an Earnings ESP of +13.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are few stocks you may also consider as our proven model shows that these have the right combination of elements to post an earnings beat in the quarter to be reported.

Vipshop Holdings Limited VIPS has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Square, Inc. SQ has an Earnings ESP of +6.06% and a Zacks Rank #2.

Gogo Inc. GOGO has an Earnings ESP of +9.46% and a Zacks Rank #2.

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