Twitter Inc. (TWTR) is set to report second-quarter 2014 results on Jul 29. Last quarter, Twitter reported a loss of 22 cents per share, narrower than the Zacks Consensus Estimate of a loss of 29 cents. Revenues of $250.9 million were well ahead of the Zacks Consensus Estimate of $237.0 million.

Let’s see how things are shaping up for this quarter.

Growth Factors this Past Quarter

Investors are expected to keenly follow Twitter’s user growth rate and engagement in the second quarter. In the first quarter, Monthly Average Users (MAUs) increased 25.0% from the year-ago quarter to 255 million. User interaction in the form of favorites and reTweets improved more than 26.0% year over year in the last quarter.

We believe that the acquisitions of Cover, Gnip, TapCommerce and Namo Media will expand Twitter’s product portfolio and monetization capability. The Omnicom partnership deal will boosts its status as an advertising platform and the integration with MoPub will drive top line in the near term.

Twitter’s recent foray into e-Commerce by testing the ‘Buy Now’ button and the acquisition of CardSpring is a significant positive, in our view. The company also strengthened its management team by hiring former Google executive, Katie Stanton, and former Goldman-Sachs executive, Anthony Noto.

However, rising costs remains a concern as Twitter continues to invest in product development, acquisitions and sales & marketing. Intensifying competition from Facebook and Google are the major headwinds.

Earnings Whispers?

Our proven model does not conclusively show that Twitter is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: Twitter has a -3.45% ESP. That is because the Most Accurate estimate stands at a loss of 30 cents per share, wider than the Zacks Consensus Estimate of a loss of 29 cents.

Zacks Rank #4 (Sell): We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are a few stocks worth considering that, per our model, have the right combination of elements to post an earnings beat this quarter:

Silicon Motion (SIMO), with an Earnings ESP of +12.90% and a Zacks Rank #1.

Cognizant Technology Solutions (CTSH), with an Earnings ESP of +6.90% and a Zacks Rank #1.

Synaptics (SYNA), with an Earnings ESP of +4.07% and a Zacks Rank #1.

Read the Full Research Report on CTSH
Read the Full Research Report on SYNA
Read the Full Research Report on SIMO
Read the Full Research Report on TWTR


Zacks Investment Research