Twitter Earnings Preview

By Katie Roof Earnings FOXBusiness


Twitter (TWTR) reports first quarter earnings after the bell on Tuesday and investors will be looking to see if the company can maintain its momentum. The company has seen its shares soar 43% this year and better-than-expected earnings could send the stock even higher.

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While active users were once the focal point of Twitter’s earnings, all eyes are on revenue growth. Analyst estimates from Thomson Reuters are expecting $457 million in revenue and earnings per share of four cents.

“Investors want to see sustained high advertising revenue growth,” said Mark Mahaney, an analyst at RBC Capital Markets.

Twitter has “shown a remarkable ability to squeeze more monetization out of their current user base,” said James Cakmak, analyst at Monness Crespi Hardt.

In addition to paid tweets and its MoPub mobile ad exchange, promoted video is expected to be a boon to Twitter’s business.

“You’re seeing huge tailwinds to pricing because of the increased focus on video,” said Cakmak. “Video typically has higher engagement rates.”

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Earlier this year, Twitter struck a deal with Google (GOOGL) to bring back Tweets to search results, a move that would bring more non-users to the Twitter platform.

“Expectations will go up once Google drives greater traffic,” said Cakmak about the deal, which should be rolled out in the coming months.

Twitter also recently acquired and released Periscope, a live streaming app that has gained early traction. Its video service Vine, has also become a significant part of Twitter’s business.

Analysts surveyed by StreetAccount are predicting 302 million monthly active Twitter users, but the social media service is still a billion users away from being the leader in the category.

“Twitter has been poorly understood and is always benchmarked to Facebook, which it is very different from,” said Max Wolff, chief economist at Manhattan Venture Partners.

Twitter has a market cap of $33 billion, whereas Facebook (FB) stands at $228 billion.

Wolff cautions investors on buying the stock right now. “The shares are very expensive and we would suggest that this is not a great entry point unless you are a long term holder.”