User growth is often the barometer investors use to gaugeTwitter Inc.'slong-term potential, but analysts are not expecting the dial to move much whenthe company releases its second-quarter results.
Recently, monthly active users for the company haveflattened, with the 2016 first quarter seeing 310 million MAU. The figure wasup only slightly from the 302 million in the comparable 2015 period.
"It would be a very happy and successful company if itwasn't for the fact that it was public and investors need growth quarter afterquarter," independent tech analyst Jeff Kagan said in an interview.
The company has certainly been trying to attract new users,particularly through the broadcast space, which is expanding in social mediaacross the board. Periscope, Twitter's live video app, now competes with thelikes of Facebook Inc.and Snapchat, whichall have released their own video apps.
Live events have been of particular interest to Twitter.Starting with a multimillion dealin April to stream the National Football League's Thursday Night Footballgames, the microblogging company has since signed content deals with theNational Basketball Associationfor two original series, the Pac-12 Networks to events produced by universitiesin the Pac-12 conference, and CBS News, a unit of , to show major political conventions.
But Seth Shafer, an analyst with SNL Kagan, an offering ofS&P Global Market Intelligence, said the company still is in a period thatwill see only 3 million to 5 million additional MAUs per quarter.
"Companies like to talk up the forward-looking stuffthat might be a big revenue stream five to 10 years down the road," hesaid in an interview, yet the "impact now on earnings is probably going tobe nonexistent."
Still, many analysts believe Twitter's live streamingefforts do have the potential to boost engagement. For example, CanaccordGenuity analyst Michael Graham in a July 10 note highlighted Democrats' usageof Periscope to broadcast a sit-in protestat the House of Representatives as a defining moment.
Graham, who has a buy rating on the stock, also pointed tothe potential of events with wide appeal like the Olympics to bring in moreunique visitors and to boost ad engagement. During the Women's World Cup fromJune to July 2015, Twitter's U.S. unique visitors were up 2.75% sequentially inJuly 2015 and 4.35% in August, Graham noted.
But broadcasts and hype around live events may not beenough, Monness Crespi Hardt & Co. analyst James Cakmak said in a July 11research note. Because sports content often is being simultaneously broadcaston Twitter and other channels, there is more pressure on Twitter to secureexclusive content that is peripheral to the event, Cakmak said. With Wimbledon,for instance, the social media company broadcast analysis and interviews fromthe matches.
"With Wimbledon, they couldn't broadcast the matchesper se, but they were inside the booth during the matches," S&P Globalanalyst Scott Kessler said in an interview. "It gave people an interestingview. I think that's what people are looking for when it pertains to the NFLagreement."
Though the platform is able to reach millions globally, ithas yet to catch on with the broader market, said Cakmak, who downgraded thecompany to neutral from buy.While Twitter's content is still proliferating across the internet, confidencein the company's ability to monetize that content is waning, Cakmak said.
For now, the company will continue to be dogged by thequestion of how to engage its latent user base.
"I think that's going to be an overhang," Kesslersaid.
Since the start of 2016, the company's stock has fallen by19.79%, from $22.17 per share to $18.56 on July 20. But it has somewhatrebounded, with the stock up 6.67% in the last three months, compared to the2.63% bump in the SNL Kagan New Media Index.
Twitter is scheduled to release second-quarter earnings onJuly 26.