In Twitter's Q1, Investors Looking For Signs User Growth And Sales Will Get On The Same Page

Earnings, Revenue Expectations

Twitter is expected to report its first quarter financial results before the markets open on April 26.

The consensus expectations call for earnings of $0.01 per share on revenues of $512.96 million. In the year-ago quarter, the company reported earnings of $0.15 per share on revenues of $594.52 million.

Barclays expects first quarter revenues of $490 million, consistent with the implied mid-point of the guidance, but below the consensus estimate.

Bright Spots, Sore Spots

Analysts Ross Sandler and Deepak Mathivanan expect Twitter's daily active user growth to be the bright spot in the first quarter. The analysts commended the company for doing a good job of turning things up.

"[W]e wouldn't be surprised if MAU picks up slightly," the analysts said, reasoning that the first quarter is a seasonally solid quarter for monthly active user growth historically.

However, the analysts expect revenue growth to lag and meaningfully depart from DAU growth, as was evident in the fourth quarter.

Historically Printing Upside To MAU In Q1

Barclays expects net adds of 320 million for the first quarter, although it cautioned that its estimates could prove conservative. The firm said the historical outperformance of MAU in the first quarter could play out in the first quarter of 2017 too.

"DAU has accelerated for two quarters in a row on some of the new features in the timeline and a more rigorous test-and-iterate approach to product management, and we expect that to continue in 1Q (consistent with 4Q's +11 percent)," the firm added.

Expecting Worse Revenue Trajectory In Q1

Citing its channel checks, Barclays said it expects worse trajectory for owned + operated ad revenue for the quarter compared to the 1 percent drop seen in the fourth quarter. The firm thinks more experimental demand is shifting over to Snap Inc SNAP, the parent of Snapchat.

"We think revenue growth fan eventually get back on track, consistent with the DAU trajectory, but not likely until 2H17 when some of the programmatic initiatives kick in," the firm said.

Maintaining At Underperform

Given the negative sentiment backdrop, Barclays said it wouldn't be surprised if shares trade up on the first quarter results. That said, the firm maintained its Underperform rating and $14 price target for the shares of Twitter, based its expectations on revenue/EBITDA trend and not on the user trend.

At the time of writing, Twitter shares were surging up 1.99 percent at $14.60.