Earnings Preview: Apple Inc. And Twitter Inc

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Apple and Twitter are scheduled to release their earnings reports tonight and investors seem unsure about Apple but interestingly enough, positive on Twitter. Of course the focus in Apple’s earnings reports will be iPhone unit numbers, including the implied number for June, while the focus in Twitter’s report will continue to be on monthly active users.

Is Apple at a bottom?

Drexel Hamilton analyst Brian White believes tonight’s earnings report will represent a trough or signal that one is near for Apple. The company warned that tonight’s earnings report would be weak, so the question now is whether Wall Street’s bar has been adjusted low enough to enable the iPhone maker to beat estimates.

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Wall Street expects Apple to post $51.97 billion in sales and adjusted earnings of $2 per share. This year’s March quarter is expected to be the weakest March quarter in at least 18 years, said White. His estimate of $52.34 billion in sales is a 31% sequential decline, which is far worse than the 17% average sequential decline over the last five years. Apple’s own guidance was for sales to be between $50 billion and $53 billion, and White said this implies earnings of about $1.94 per share at the midpoint.

He continues to look forward to the iPhone 7 cycle, as many are because of how disappointing the iPhone 6s cycle has been. However, some have warned that the iPhone 7 cycle might not be much better than the iPhone 6s cycle because Apple might not be planning many improvements from last year’s models.

White has a Buy rating and $200 per share price target on Apple. The stock edged lower by 0.79% to $104.25 per share during regular trading hours today.

More MAU challenges for Twitter

One of the very first metrics investors will be looking for in Twitter’s earnings report is monthly active user growth as the micro-blogging platform actually lost users in the December quarter. At the time of the quarterly earnings report in February, management said they were starting to see growth in monthly active users and that this metric was higher than where it was in the third quarter.

Canaccord Genuity analyst Michael Graham noted that data from comScore suggests that user trends weakened after that though, and he believes that Twitter might actually miss his projection of 5 million user adds. However, one bit of good news he mentioned was that the decline in user engagement appears to be moderating as the first quarter represented the first sequential increase “in recent memory.” The analyst said this increase might reflect that Twitter’s recent product changes are working.

Graham and team continue to rate Twitter as a Buy with a $23 per share price target as they believe the company’s platform can remain relevant and that its product improvements will improve conversion rates throughout the year, thus spurring user growth. He also sees Twitter as an attractive acquisition target because of its real-time content.

Twitter shares climbed 4.45% to $17.85 during regular trading hours today.

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