SunTrust's Bob Peck Expecting 'Tough' Q2 Report For Twitter

SunTrust analyst Bob Peck said that the Twitter Inc TWTR earnings report on Tuesday will show a "tough" quarter with little-to-no growth in core monthly active users (MAUs). Peck expects Q2 core MAUs flat at 302 million with an additional 8 million SMS fast followers, growth of 2 million over the prior quarter.

Beyond MAUs, Peck said that investors should also focus on the "quality of the user net adds and their level of engagement." Peck added that, "We think engagement and the quality of new users is very important to the long-term size and monetization of the platform." He expressed skepticism that the previous quarter would show more substantial engagement.

Peck also weighed in on the CEO debate, saying that he expects Twitter's president of global revenue, Adam Bain, to be named the permanent CEO. SunTrust pointed to interim CEO Jack Dorsey's ownership stake and role in Square as a primary reason, also noting that Dorsey can "still guide Twitter product direction as chairman."

While Peck is "optimistic" long term, he said that the "near term will continue to be challenged." The long-term outlook is bright based on new products, the Google deal, Periscope and the ability to improve monetization and capitalize on the logged out user base.

The firm rates Twitter as Neutral with a $40 price target.

Year-to-date, the stock has declined 1.3 percent, despite at one point being more than 45 percent higher on the year. Twitter gave up all those gains following the Q1 earnings report when the price fell from $52 to below $38 in a matter of days.