North America

Earnings Preview: Twitter Inc. Q1 2017 (TWTR)

By: Craig Bowles

Overview

Twitter, Inc. (TWTR) is slated to report 1Q2017 earnings before the open on Wednesday April 26th. The earnings “letter” is expected at approximately 7:00 a.m. ET with a conference call to follow at 8:00 a.m. that is webcast through Twitter Investor Relations. Launched in July 2006, the global communication platform provider enables users to send and read short 140-character messages.

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Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS): Analysts expect $0.01 (range -$0.04 to $0.10) (Source: Yahoo! Finance). Consensus was $0.14 three months ago.
  • Revenues: Company decided not to provide revenue guidance last qtr. Analysts expect a Y/Y decrease of 13.9% to $511.91 mln (range $484.0 mln to $549.3 mln). Consensus was $629.29 mln three months ago.
  • Average Monthly Active Users (MAUs): Last quarter was 319.00 mln.
  • Mobile Monthly Active Users: Last quarter was 83% of total MAU’s or 264.77 mln.

Revenue Guidance for 2Q2017 and FY2017 (if available):

  • Revenues Guidance 2Q2017: Analysts expect a Y/Y decrease of 8.6% to $550.14 mln (range $502 mln to $597 mln).
  • Revenues Guidance FY2017: Analysts expect a Y/Y decrease of 6.9% to $2.35 bln (range $2.09 bln to $2.59 bln). Consensus was $2.79 bln three months ago.
  • Twitter’s market cap is $10.6 billion (down from $34.53 billion in April 2015). Price/Sales ratio of 4.1 compares to 21.8 in 2015.
  • Analysts view Twitter with 4 Buy, 22 Hold, and 15 (10 last qtr) Sell ratings. (source: MarketBeat.com)
  • Insiders sold 641,235 shares in the last three months and sold a net 6,922,372 shares in the past year. (source: NASDAQ.com)
  • Twitter shares have a 1-day price change on earnings of 10.30%. Options are pricing in an implied move of 8.68%.

Recent News

  • 04/22: Twitter should capture, through fees, a piece of the economic value its service brings to institutions and businesses, according to a post on TechCrunch.com.
  • 04/06: Amazon (AMZN) paid $50 million for the rights to stream NFL games. Twitter had some success last year with NFL streaming but prices for live content are on the rise, according to a post on Barron’s.com.
  • 04/03: Canaccord Genuity reiterated a Hold rating on Twitter. While usage seems able to meet expectations, actually making money off ads will remain a challenge. Prices on ads may still need to come down by as much as 50% to 66% in order to align with competitors, according to a post on Barron’s.com.
  • 03/30: Barclays initiated coverage of Twitter with a Sell rating due to user-retention worries. While two million “non-registered” unique visitors come to Twitter’s site and app every day, Twitter only converts 1% of them into new users, according to a post on Barron’s.com.
  • 03/24: Twitter is testing out a subscription service, according to a post on Barron’s.com.

Technical Review

Twitter’s stock trended steadily lower from $53.49 on April 8, 2015 to May 2016’s $13.73, so is again testing the lows from the first half of 2016. (Chart courtesy of StockCharts.com)

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Summary

Personnel departures appear to have passed. Twitter continues to focus monetizing individual users but probably should focus on premium services for providers of information. Institutions are slowly moving to the web and Twitter in lieu of the newswire services. Twitter has seen analyst bullishness lessen over the past year and insider selling resumed. Private equity could show interest this year. The company has beaten earnings estimates by an average of 4c the last four quarters. Estimize consensus for Non-GAAP EPS of $0.05 on revenue of $529.59 mln compares to analyst consensus of $0.01 on revenue of $511.91 mln. Revenue guidance (if available) and user data will also factor into the market reaction.

 

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