Analyst Previews Twitter's Q2 Results: Cuts Target, Warns Of 'Purgatory'

In a report published Thursday, Brean Capital analyst Sarah Hindlian argued that

is in a "transitional period," which makes it a "difficult" stock for investors to hold. Hindlian continued that despite increased risk in the short-term, Twitter is still a "valuable asset" that is still nascent, despite the Street having "gotten well ahead of Madison Avenue." However, the analyst remains "constructive" on event-driven advertising opportunities (such as Project Lightning) and the company is still "in the early innings of a long game" which won't necessarily be linear but will yield positive results

Hindlian also previewed Twitter's second quarter results which are scheduled to reported July 28 after market close. The analyst is expecting Twitter's print to be in-line with its reiterated guidance and the company is expected to show "~0 million" sequential net adds (ex. SMS Fast) to its monthly active user base. Hindlian is estimatingTwitter to report revenue of $472.2 million which is at the low end of the company's $470 million to $485 million guidance range while the company is expected to earn $0.05 per share. The analyst explained the estimate assumes a "steep deceleration" in year over year growth rates to 51 percent on a reported basis versus 74 percent year over year last quarter. Hindlian also estimated Twitter will report its worldwide monthly active user base to be 302 million (ex-SMS Fast), or 308 million including SMS Fast. Finally, Hindlian offered eight key topics for investors to look out for during the post earnings conference call: 1) CEO search update, 2) Google partnership updates, 3) impact from foreign exchange will have on growth, 4) monthly active user guidance/trends, 5) SMS Fast Usage guidance/trends, 6) Logged-off user value, 7) CPx/Engagement trends; and 8) improving user case. Shares remain Buy rated with a price target lowered to $47 from a previous $55 to "reflect near-term risks while the company transitions engagement measurements, searches for a new CEO, and looks to improve the user experience."