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Twitter Inc Q3 2017 Earnings Preview: The Hunt For MAUs And Ad Dollars

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Twitter Inc (NYSE:TWTR) Q3 2017 earnings are set for release on Thursday before opening bell, and Wall Street is looking for earnings of 7 cents per share on $586.73 million in revenue. In last year’s third quarter, the social media firm reported 13 cents per share in earnings on $615.93 million in revenue.

What to expect in Twitter Q3 2017 earnings

Once again, the big story for Twitter Q3 2017 earnings is expected to be user growth, or the lack, thereof. Analysts are generally expecting to see that user growth remains lackluster; Wedbush is currently projecting monthly active user growth of 2.1 million. The firm predicts that the U.S. will hold steady at 68 million users while international users grow to 262.1 million.

Wedbush analyst Michael Pachter doubts that the changes made by Twitter management will have any real impact on domestic user growth because he sees the company’s platform as remaining “unintuitive and overcomplicated.” He also noted that the issue of bullying and other types of online abuse hasn’t really been dealt with yet.

However, he is expecting “modest” upside to revenue versus both consensus and guidance. He’s projecting $611 million in revenue and non-GAAP earnings of 5 cents per share. He’s also looking for adjusted EBITDA of $156 million, versus the consensus of $160 million and Twitter’s guidance of $130 million to $150 million. The implied revenue guide for the Twitter Q3 2017 earnings was $500 million to $600 million, according to Pachter.

He believes that the modest revenue decline will mainly be driven by TellApart and “unfavorable cost per engagement” trends, which he expects to more than offset any “positive promotion” the platform gets from “President Trump’s tweetstorms.”

Waiting for ad dollars

Deutsche Bank analyst Lloyd Walmsley said in his preview note on Twitter Q3 2017 earnings that plans to stay on the sidelines until the return of incremental ad dollars. He’s expecting a 10% year-over-year increase in daily active user growth even though the company is up against a difficult comparison. He seems to see management’s execution in a better light than Pachter does.

Walmsley said his conversations within the ad industry have pointed to “an increasing resonance of Twitter’s core sale pitch” as more ads returned to the platform starting late last year. He noted that this should be a leading indicator that revenue growth is going to return, although he adds that feedback on ad performance has remained mixed, which is why he is still hesitant.

He believes that better monthly and daily active user growth would improve the interest of advertisers in Twitter’s platform, and he would become more positive on the company if it accelerates its daily user growth further.

Looking to Q4

Pachter expects Twitter to guide for sequential revenue and EBITDA margin growth for the fourth quarter. He pegs the company’s fourth-quarter revenue at $718 million and its adjusted EBITDA at $206 million with a 29% EBITDA margin. The consensus currently stands at $692 million and $199 million, respectively. In last year’s fourth quarter, Twitter reported $717 million in revenue and $215 million in adjusted EBITDA with a 30% EBITDA margin.

During regular trading hours on Wednesday, Twitter stock tumbled by as much as 0.7% to $17.12.

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