The San Francisco-based social media company had a bit of a rough day the last time it reported quarterly earnings, starting with an early leak of its results and ending with a somewhat grim earnings call. Twitter also failed to report any significant gains in average Monthly Active Users (MAUs), claiming a total of 302 million MAUs for the first quarter, up 18% year over year, but only 14 million higher than the previous quarter.
The fallout eventually led to Dick Costolo stepping down as CEO and Jack Dorsey taking over as interim CEO as the company searches for a more permanent solution.
In addition to any news on the CEO process, analysts will be looking for positive user growth and improved ad monetization. Twitter continues to roll out new products and features at a steady pace, but the company will need to prove that these releases are positively impacting metrics.
According to Thomson Reuters, analysts, on average, expect second-quarter revenue of $481 million with earnings of 4 cents per share. In April, Twitter predicted second-quarter revenue would fall between $470 million and $485 million.
Last quarter, Twitter beat analyst expectations with earnings of 7 cents a share but missed expectations on revenue of $436 million.
Shares of Twitter recently fell nearly 3% to $34.50.
Here's what analysts said about Twitter:
Bob Peck, SunTrust Robinson Humphrey (Neutral, $40 PT)
In addition to user counts, we think it's important to focus on several other metrics, including the quality of the user net adds and their level of engagement.
We think engagement and the quality of new users is very important to the long-term size and monetization of the platform. Lastly, the company's continued crackdown on spam bots is paramount and could impact metrics in any given quarter. While we believe the near term will continue to be challenged, we remain optimistic longer term due to: new products; the Google deal; Periscope; ability to improve monetization; and tapping into the large logged-out user base. We remain Neutral until we can see more traction on these initiatives.
Youssef Squali, Cantor Fitzgerald (Buy, $50 PT)
Investors' focus is likely to be on user growth -- or lack of thereof -- and on interim CEO Jack Dorsey's short-term and intermediate plans to get the company and the stock out of its funk. We believe expectations going into the quarter are relatively muted, with roughly two-thirds of the ratings neutral or negative (FactSet), which positioned the stock well in case of a neutral or positive surprise.
Ross Sandler, Deutsche Bank (Buy, $60)
We think investors are bracing for another challenging quarter for Twitter, but similar to the two prior bear-raids, we don't see reality as nearly as bad as current sentiment. The street is expecting "negative MAU adds" and "in-line and guide-down revenue" both of which could be better than feared. The TWTR story is not without controversy, but we remain firmly in the bull camp as the stock is off 40% in three months, the pace of new product development is better than ever (although TWTR hasn't solved the broader user growth issue), and outside of the CEO departure the rest of management is largely intact.
We think the direct response advertising dollars should start flowing through in size in 2016 once all the measurement plumbing is in place, which should prop up growth rates. The new user retention problem is a much harder fix, and one that we are admittedly losing some faith around, but at a $24 billion market cap, with Periscope and Vine potentially adding meaningful to the EV, we don't need it.