Twitter Earnings Preview: Revenues To Decline Amid Improving Profitability

February 6th, 2018 by Trefis Team
45.08
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TWTR: Twitter logo
TWTR
Twitter

Twitter (NYSE:TWTR) is set to report its Q4 2017 earnings on Thursday, February 8. In the previous quarter, the company saw a decline in revenues, primarily due to a subtantial decline in its U.S. advertising revenues. However, the company stated that it is poised to report revenue growth in the coming quarters as it executes its sales strategy and improves its direct ad format. While we expect revenues will grow by around 14% sequentially, we forecast revenues to decline y-o-y to $671 million in Q4 due to a decline in revenues from the U.S. Additionally, we expect the company to report a profit in Q4 as its EBITDA is expected to improve to $235 million. We also expect marginal growth in its average monthly active users (MAUs) in Q4. We have created an interactive dashboard that illustrates our Q4 expectation for Twitter’s result. You can modify the revenues from each business segment and net income expectations to see how the company’s results would be affected.

 

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In this earnings announcement, we expect:

  • Twitter’s revenues will likely continue to fall as the company has not been able to materially improve monetize of its user base.
  • Revenues from the U.S. will likely decline again as advertisers spend less on Twitter. We also expect MAUs to stabilize around 70 million for the U.S. market.
  • Revenues from international markets will stabilize at $276 million. We also expect MAUs to grow to over 263 million for international markets.
  • Due to live streaming and increased video content, total ad engagements increased 95% in Q3. The company also announced 40 live-streaming partnerships during the quarter. We expect that these initiatives once again drove engagement levels in Q4, and expect the click-through rates to grow.

Twitter expects adjusted EBITDA to range between $220 – $240 million, a growth in comparison to its Q4 2017 figure of $217 million.

At present, our $23 price estimate for Twitter is below the current market price.

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