Twitter Q1 Earnings Preview: Axiom Analyst Sees Jack Dorsey's Efforts To Show Progress

Twitter Inc TWTR is expected to release its first-quarter results after the market close on Tuesday. Victor Anthony of Axiom expects Jack Dorsey's efforts to show progress, albeit slow.

Expectations For The Print

Wall Street analysts, on average, expect the micro-blogging site to earn $0.10 a share on revenue of $607.84 million, implying year-over-year growth of 43 percent in earnings and 39.4 percent in revenues.

Anthony sees revenues of $615 million (up 41 percent year-over-year), and adjusted EBITDA of $168 million; Twitter guided for revenues of $595 million–$610 million and an adjusted EBITDA of $150 million–$160 million.

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"We are expecting 1Q results in line with our estimates and guidance in line with consensus," Anthony wrote in a note.

Further, the analyst expects 40 percent growth in gross ad revenues to $543.6 million, and data licensing revenues of $71 million – an increase of 49 percent from last year.

On the advertising front, Anthony expects O&O advertising revenue growth of 20 percent to $454 million and off-network ad revenue of $89 million.

"We model 308 million MAUs (ex-SMS) for 3 million net adds, above consensus of +2 million," Anthony noted.

"Given the conflicting and varied data points, it was difficult to get a precise read on MAUs for 1Q. However, other more qualitative checks, which we side with, believe that Jack Dorsey's efforts should show incremental progress," the analyst said.

Rating, Justification And Checks

Anthony, who has a Buy rating on the stock, said his ad checks were "more on the lukewarm to positive side overall." However, the analyst's checks indicated "direct response advertisers appeared excited" about better measurement tools that Twitter is rolling out that could get more spending to the platform.

But, the analyst highlighted that investors should get confidence on the potential user growth and increase in O&O advertising growth for the stock to trade above the current range of $15–$18.

"We are likely to get confirmation of the MAU measured growth with the 1Q16 print, while we would need to wait for the back half for the O&O ad growth acceleration," Anthony said.

For the second quarter, consensus is expecting revenues of $677 million and an adjusted EBITDA of $173 million.

At time of writing, shares of Twitter were up 4.05 percent to $17.78, while Anthony has a price target of $24.