Two words sum up how investors feel about Twitter’s first-quarter performance: low expectations.
The social network will report its earnings today (April 26) after US markets close, and investors are hoping it won’t be yet another letdown. (Recall that when Twitter released its fourth-quarter results, it surprised investors with negative user growth, which sent shares barreling down 12%.)
As always, all eyes will be on monthly active users. Analysts are anticipating 3 million to 4 million new users in the first quarter, according to FactSet. That would represent a 2% increase from the year-ago period.
“We don’t see user growth picking up meaningfully,” Deutsche Bank’s Ross Sandler warned in an April 3 note.
But there is an advantage to setting the bar low, and it’s that Twitter might actually reach it, especially since the first quarter has historically been stronger for the company.
“We believe expectations across the Street are pretty muted for sub growth, so 3-4 million net adds or more [to monthly active users] would likely be viewed positively,” Barclays said in an April 15 report.
But investors are also worried about engagement. Though Bob Peck at SunTrust Robinson Humphrey is cautiously optimistic Twitter will report financials in line with “suppressed expectations,” he acknowledges that “activity on the platform remains challenged.”
Revenue is also showing signs of decelerating. At $610 million, the top end of Twitter’s guidance would represent a 40% rise in revenue year-over-year, the slowest growth since Twitter’s gone public. Overall, analysts are expecting profit of 10 cents per share, up from 7 cents a year ago.
Investors will be keenly paying attention to any developments around Twitter’s attempt to make money off logged-out users, and details relating to its recently announced streaming deal with the National Football League (which at least one analyst believes isn’t all that great of a deal). The company might also announce further changes to the board, as CEO Jack Dorsey had alluded to the possibility after Twitter added two new directors last month.