Will Twitter's (TWTR) Earnings Disappoint Again? - Analyst Blog

Twitter Inc. TWTR is set to report first-quarter 2014 results on Apr 29. Last quarter, Twitter disappointed by reporting a loss of $1.41 per share, which was significantly wider than the Zacks Consensus Estimate of a loss of 10 cents.

Let's see how things are shaping up for this quarter.

Key Catalyst

Investors are expected to keenly follow Twitter's user growth rate, engagement and monetization in the first quarter. Last quarter, revenues surged 116.2% year over year and 44.0% quarter over quarter to $242.7 million. User engagement in the form of favorites and reTweets improved more than 35.0% on a year-over-year basis.

Growth Factors this Past Quarter

Per eMarketer, Twitter's maturing user base is a major concern for its growth abilities. In such a scenario, user engagement gains significant importance in order to limit churn rate to other social sites such as Facebook FB and LinkedIn LNKD.

Twitter continues to launch new features that are aimed at driving user engagement. The company allowed Vine application users to send private text messages along with videos to their network contacts as well as outsiders.

However, we note that Twitter's recent new features that are similar to Facebook have failed to impress users. On the other hand, the introduction of photo tagging feature for Apple's AAPL iOS and Google's Android and an expected music service are the key near-term growth drivers.

Earnings Whispers?

Our proven model does not conclusively show that Twitter is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Most Accurate estimate stands at loss of 26 cents per share that coincides with the Zacks Consensus Estimate. Hence, the difference is of 0.00 %.

Zacks Rank: Twitter's Zacks Rank #2 (Buy) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.