Twitter Inc (NYSE:TWTR) is scheduled to release its third earnings report as a public company tonight after closing bell. Investors have been disappointed in the last couple of earnings reports because user growth hasn’t been as good as expected. So will we see a repeat this time around? Whatever happens, analysts at MKM Partners say we can expect some fireworks, as volatility around Twitter’s earnings has been immense the last two quarters.

In a report dated July 28, MKM Partners managing director Rob Sanderson noted that the current revenue consensus estimate for Twitter is $283 million. That’s a little above the high end of the company’s guidance and his own estimate of $275 million. However, he thinks Twitter could achieve or beat consensus on revenue.

Twitter Inc TWTR
Twitter Inc TWTR

Twitter Inc (NYSE:TWTR)’s user growth remains the top metric

He agrees with most other analysts in thinking monthly average user growth remains the most important metric. He estimates consensus at about 10 million net additions, which would bring Twitter’s active users to 265 million. He also notes that Twitter could disappoint here again because third party data suggests the micro-blogging company only added about 5 million monthly active users. After that point though, the company’s access to the Twitter API was suspended, suggesting that the data is incomplete.

Sanderson also states that Twitter management’s tone on monthly active user growth got better as the quarter went on. He said this suggests that the company is seeing early success as it tries to cut down on churn, make it easier for users to sign up and find content, and improve engagement.

Twitter Inc (NYSE:TWTR) Stages of user growth

The analyst notes that Twitter does have “very high” activations but also “very high” leakage after users give the micro-blogging platform “only a few tries. He thinks improvements in user growth will happen in two stages. The first stage is cutting down on the high attrition rates by gradually improving the company’s user experience. The second stage is “a substantial overhaul” of the user experience.

He believes the first stage is currently underway and could have “material impact.” He says only a reduction from 20% to 15% in churn would result in double the number of net monthly additions. He adds that the second stage is a bigger ambition but that it has the potential to transform Twitter into a “truly mass-market service” with more than 1 billion users around the globe. He states that his firm has conducted three studies with more than 6,000 total participants which have shaped his view regarding this.

Sanderson expects volatility in Twitter stock to be high this week, although he remains confident on the company’s room for growth and “top-line story,” with ad performance, international growth and new ad formats driving it all. He is also confident that the company will show improving user growth numbers, although he is not confident on the June quarter number.

The analyst maintained his Buy rating and $155 per share price target on Twitter heading into tonight’s report.

Other items to focus on in Twitter Inc (NYSE:TWTR)’s earnings

In a separate report dated July 25, 2014, RBC Capital analysts Mark Mahaney and Rohit Kulkarni and their team say their estimates are lower than consensus as well. They’re looking for $279 million in revenue, EBITDA of $27 million and non-GAAP losses of 2 cents per share. Twitter guided for $270 million to $280 million in revenue and $25 million to $30 million in EBITDA.

They pointed to data points that show ad spend on social media will keep growing. Their survey on return on investment suggests Twitter is tied with YouTube for third place, with Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) in first place and Facebook Inc (NASDAQ:FB) in second place. He also said 63% of Twitter advertisers expect to increase their ad spend in the next year.

Other areas they think investors should focus on in Twitter Inc (NYSE:TWTR)’s report tonight include trends in ad revenue growth, which makes up 90% of the company’s overall revenue. It increased 125% in the first quarter, which was a slight acceleration. They believe this time, Twitter’s ad revenue will decelerate but remain strong at a 110% growth rate year over year.

They also focus on the monetization gap. Twitter saw 89 cents per monthly average user in the first quarter, compared to Facebook’s $1.81. The company did increase its monetization 80% year over year though, compared to Facebook’s 57% growth, so the gap is closing.

The RBC Capital team maintained their Outperform rating and $60 per share price target on Twitter heading into tonight’s report.