Pachter Expects Twitter Shares To Sell-Off Following Q3 Report, Notes 'MAUs To Disappoint Again'

• Shares of Twitter Inc TWTR have lost more than 35 percent year-to-date, but have gained more than 10 percent over the past month.
• Twitter is scheduled to report its third-quarter results after market close on Tuesday, October 27.
• Michael Pachter of Wedbush is expecting Twitter's user growth "to disappoint again."

Shares of Twitter have lost more than 35 percent over the past year with many cases of heavy selling occurring after the company reported its quarterly results. Twitter is scheduled to report its third quarter results (ending September) after the market close on Tuesday, October 27.

Michael Pachter of Wedbush commented in a note on Monday that Twitter should report its revenue and adjusted EBITDA in-line with what it said in a pre-announcement on October 13. The company said that it expects its third-quarter revenue and EBITDA to be at or above the high-end of its guidance range of $545–560 million and $110–115 million, respectively. Meanwhile, the analyst is estimating Twitter will report revenue of $565 million, adjusted EBITDA of $117 million, and an earnings per share of $0.05.

Pachter said Twitter didn't mention any user metrics or growth in its pre-announcement, suggesting that "those figures will be underwhelming and disappointing." The analyst added that investors remain concerned over the company's slowing user growth and pointed out last quarter's year-over-year monthly active user (MAU) base slowed to half of the second quarter 2014 amount, while its total MAU of 304 million was only two million higher from the prior quarter.

"Had user growth been strong in Q3, Twitter would likely have said so; because user figures were omitted, we expect MAUs to disappoint again, resulting in a post-results sell-off."

Finally, Pachter stated that the recent re-appointment of Jack Dorsey as CEO won't result in "dramatic change" even though the executive is a "visionary" and also a the CEO of Square, a company that has recently submitted the necessary regulatory forms to initiate a public offering.

Shares remain Neutral rated with an unchanged $30 price target.