A Glimpse into Twitter Inc (TWTR) Before the Earnings Curtain Rises This Week

GBH Insights' Daniel Ives sees more signs of ad growth and MAU recovery ahead, but Twitter's turnaround narrative has not changed fully just yet.

Twitter Inc (NYSE:TWTR) is set to deliver its fourth quarter earnings in two days, and the question hanging in the air continues to circle the comeback potential for the social media giant.

GBH Insights analyst Daniel Ives is opting to be on the safe side when it comes to Twitter’s revival story.

On the one hand, the fourth quarter should mark one more stride in “the right direction” for Twitter.” On the other hand, the road is not clear of challenges quite yet- including COO Anthony Noto’s exit from the company.

As such, the analyst reiterates a Neutral rating on TWTR stock with a $25 price target, which essentially aligns with current trading levels. (To watch Ives’ track record, click here)

Ives angles for a slight beat from Twitter against the Street’s forecasts of $686 million in revenue and $0.14 in EPS.

“Our GBH Tech Tracker results have been incrementally positive on Twitter as feedback from advertisers and user engagement appear to be trending positive into 2018, which is a breath of fresh air for investors that have patiently awaited for this turnaround story to manifest after years of pain. A tailwind for Twitter in the near-term in our opinion is the Facebook Newsfeed overhaul, which is forcing publishers and online advertisers to ‘dip their toe in the water’ on the Twitter platform and start to ramp up ad investments on this platform,” highlights Ives.

The analyst notes that another positive in terms of advertisers and publishers is a rising number willing to take the gamble and “experiment” on Twitter’s ad platform- one that has been signaling rising hints of both ad gains as well as turnaround for monthly active users (MAUs). When assessing Twitter’s recovery, the analyst pinpoints a one-two punch of monetization along with better ad growth trends as the “key ingredient in Twitter’s potential turnaround story for 2018.”

Ives continues, “The combination of consecutive quarters of accelerating DAU growth, improving advertiser feedback/demand, and the steady progress towards GAAP profitability are all clear positives which should gain further steam after this 4Q earnings report.”

For the fourth quarter, the analyst bets on 3 million net adds in MAUs, taking the number to 333 million for Twitter. This would mark a 4.5% year-over-year lift for 2017, a ‘small victory’ from Ives’ perspective. For the new year, the analyst predicts 4% to 5% in MAU growth. Ultimately, Ives calls for better-than-anticipated fourth quarter earnings along with a strong guide from the TWTR team. “Slowly,” but surely, the “narrative of the Twitter story” is starting to change.

TipRanks showcases an overwhelming neutral stance hovering around Twitter stock. Based on 19 analysts polled in the last 3 months, 6 rate a Buy on Twitter stock, 10 maintain a Hold, while 3 issue a Sell on the stock. Is the stock overvalued or undervalued based on analysts’ expectations? Consider that the 12-month average price target stands at $23.07, marking an 8% downside from current levels.

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