Is Twitter Set Up to Beat Facebook in Q2?

Twitter Inc. (NYSE: TWTR) shares appear to be feeling some sympathy pains from Facebook’s horrendous earnings report. However, Twitter will have a chance to make a case for itself in its own earnings report coming out on Friday before the markets open.

The consensus estimates from Thomson Reuters call for $0.17 in earnings per share (EPS) and $596.23 million in revenue for Twitter’s second quarter. The same period of last year reportedly had $0.08 in EPS and $573.86 million in revenue.

Over the past two months, Twitter has suspended more than 70 million accounts that the company believes are either fake or otherwise suspicious. It was reported that the purge would continue in July as well.

At the end of the first quarter, Twitter reported 336 million active users. If 70 million accounts have been suspended, that’s a loss of 20%. But there’s a difference between accounts and active accounts.

The company’s campaign against fake accounts, bots and trolls is the result of Russian interference in the 2016 U.S. elections and pressure from Congress on social media companies to mend their ways.

On one hand, removing fake and suspicious accounts will lower the company’s user numbers. Because growing the company’s user base is an important metric for analysts and investors, anything that reduces either growth or the total number of users is a concern.

Excluding Thursday’s move, Twitter has outperformed the broad markets, with its stock up 121% in the past 52 weeks. In just 2018 alone, the stock is up 84%.

A few analysts weighed in on Twitter ahead of the results:

  • Macquarie has a Neutral rating with a $42 price target.
  • Morgan Stanley has an Equal Weight rating with a $34 target.
  • Merrill Lynch has a Sell rating with a $27 target price.
  • Cleveland Research has a Hold rating with a $46 price target.
  • Wells Fargo has a Market Perform rating and a $42 price target.

Shares of Twitter were last seen down about 4% on the day to $42.50, with a consensus analyst price target of $34.24 and a 52-week trading range of $15.67 to $47.79.

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