About two weeks ago, Sterne Agee analyst Arvind Bhatia raised his rating on Twitter Inc. (NYSE: TWTR) from Underperform to Neutral. In his opinion, user growth and engagement were seen to have potential for improvement in the near to medium term.
Last Friday, Bhatia doubled down on his upgrade saying that recent product changes at the company and some new senior executive hires “have incrementally enhanced Twitter’s positioning.”
The current first-quarter consensus estimates from Thomson Reuters for Twitter’s net loss is $0.03 a share on revenues of $241.47 million. Twitter is scheduled to release first-quarter results after markets close on Tuesday.
Bhatia believes revenues will come in at $248 million and EBITDA will come in sharply higher at $31 million, compared with a consensus estimate of $18 million. That is a 3% jump over the consensus revenue estimate and an 83% leap over the EBITDA consensus.
The analyst sees monthly active users increasing 5% sequentially (25% year-over-year) and engagement — that is, total timeline views — up 6% sequentially (15% year-over-year).
On the monetization front, Bhatia expects a first-quarter advertising revenue increase of 2% sequentially (117% year-over-year) and EBITDA margins of 12.5%. If that pans out, margins will be down from 18.4% in the prior quarter, but up from 10.3% a year ago.
Shortly after Bhatia’s previous note on Twitter was published, the company introduced a new advertising feature that displays an ad to download an app from within Twitter’s mobile app. Bhatia said in his earlier note that this was a “potential catalyst to the stock, given the size of the market.”
Twitter shares traded down about 3.9% in the noon hour on Monday, at $40.01 in a 52-week range of $38.80 to $74.73.