Social media giant Twitter (TWTR) is slated to report first-quarter results before the markets open tomorrow, as investors hope earnings contribute to a stock that is up 20% year-to-date.
Investors are hoping the company shows continued revenue growth, as 2018 turned out to be a strong year (following a poor 2017). Guidance calls for revenue growth of between 8% and 17%, with consensus at $775 million. But revenue isn’t the only thing to look at — the social network’s monthly user base declined by 9 million between Q4 2017 and 2018; this is expected to continue as Twitter continues to improve its health.
Ahead of the call, analyst Michael Pachter of Wedbush remains Neutral on the stock, with a $37 price target, which reflects an 8% upside from current levels. (To watch Pachter's track record, click here)
Pachter estimates revenue of $785 million, adjusted EBITDA of $286 million, and non-GAAP EPS of $0.18, compared to consensus estimates of $775 million, $244 million, and $0.15, respectively, and revenue guidance of $715 – 775 million. The analyst expects “continued momentum with newer ad products and formats (e.g., the Video Website Card and the Video App Card) as well as improved engagement from product changes (e.g., the ability to toggle feed ranking between latest and top Tweets) to drive results towards the high end of guidance or above.”
"The company’s revenue outperformance in Q1:18 and Q1:17 (beating by 14% and 11%, respectively, relative to the midpoint of the implied guidance range) suggests to us that management’s forecasting ability has improved over the past two years against a backdrop of increased demand [...] Twitter introduced mDAU (monetizable daily active users) as its preferred audience engagement metric (with Q1 to be the last quarter the company provides an MAU figure), and we expect sequential mDAU growth of 1 million,” the analyst stated.
Looking forward, Pachter expects revenue of $830 million (up 17% year-over-year and 6% quarter-over-quarter) in Q2, with adjusted EBITDA of $317 million (up 20% year-over-year), reflecting an EBITDA margin of 38%, and roughly 100 bps of year-over-year margin expansion. Pachter’s estimates are higher than consensus at $819 million and adjusted EBITDA of $279 million, as the analyst estimates “sequential mDAU growth of roughly 1 million in Q2, reflecting flat mDAU growth in the U.S. and growth of 1 million mDAUs internationally."
All in all, Wall Street isn’t exactly sold yet on Twitter. TipRanks analysis of 15 analysts shows a consensus Moderate Buy rating, with six analysts recommending Buy, eight saying Hold and two suggesting Sell. The average 12-month price target on the stock is $35.17, representing a slight upside from current share price. (See TWTR's price targets and analyst ratings on TipRanks)