Based on intra-quarter data points and RBC Capital Market’s model sensitivity work, analysts view Street estimates as achievable for the quarter, though visibility into Twitter Inc (NYSE:TWTR) fundamentals is admittedly limited.

Twitter Earnings

Key Points for Twitter’s Q4:

Twitter to report Q4 earnings results on February 5th – Analysts are expecting revenue of $235MM, above consensus estimates of $217MM. Analysts’ estimates for EBITDA/non-GAAP EPS of $31MM/($0.01) are also above the Street at $22MM/($0.03).

Intra-quarter data points:

1. RBC Advertiser Survey Results – RBC’s survey of advertising professionals (conducted with Ad Age) yielded several positive results for Twitter Inc (NYSE:TWTR).

  • No. 1: The Twitter advertising platform is improving – 40% of respondents had seen increased spend and ROI over the last 6 months.
  • No. 2: Twitter advertising spend is likely to increase – 60% of Twitter advertisers expect to increase their budget in the next year.
  • No. 3: Twitter has significant ad growth spend potential – 83% of advertisers surveyed use Facebook Inc (NASDAQ:FB) as a marketing channel, while only 71% use Twitter.

2. Positive FB Read-Through – Analysts think the read-throughfrom Facebook Inc (NASDAQ:FB)’s Q4 results was broadly positive for Twitter Inc (NYSE:TWTR), especially in terms of highlighting monetization growth.

Key items to focus on:

1. Revenue growth trends – especially advertising – Advertising revenue, which makes up 90% of Twitter Inc (NYSE:TWTR)’s total revenue, reaccelerated to 123% growth in Q3:13. Analysts think it can largely maintain this momentum, growing 121% in Q4:13.

2. User growth and engagement – Twitter has achieved impressive scale (232MM MAUs as of Q3:13, growing 39% Y/Y). They think that this growth will decelerate slightly to 38% in Q4.

3. Monetization gap – Twitter monetizes its users at a much lower rate than Facebook, but is steadily closing this gap. In Q3:13, Twitter Inc (NYSE:TWTR) grew its monetization 61% Y/Y compared to Facebook Inc (NASDAQ:FB) at 40%.

Analysts maintain their Outperform rating and $60 price target: Analysts remain positive on Twitter Inc (NYSE:TWTR)’s ability to become one of the Web’s leading utilities (alongside Google, Amazon, Facebook). Twitter has displayed very robust growth in key metrics, and we have confidence that this momentum can continue as the company develops its advertising platform.

Twitter Inc (NYSE:TWTR) is one of the best plays off of two of analysts’ 2014 Internet growth factors: increasing mobile materiality and the online migration of TV ad budgets. With the run the stock has had since the IPO, RBC’s $60 price target makes this a small – and admittedly very volatile – Buy, but analysts remain enthusiastic about the company’s long-term opportunity. Analysts’ $60 price target is the result of a 22x P/S multiple and a 110x EV/EBITDA multiple on firm’s 2015 estimates. Analysts view research firm’s outlook for a three-year 64% revenue CAGR and a 123% EBITDA CAGR as providing support for these very high multiples.