Twitter Inc (NYSE:TWTR) held its first ever Analyst Day this week, and investors don’t seem to be too impressed. Analysts have mixed feelings about what management said, noting that executives tried to create positive sentiment around the company by presenting a solid framework of the goals they want to accomplish.
Where Twitter management wants to go
In their report dated Nov. 13, 2014, Canaccord Genuity analysts Michael Graham, Maria Ripps and Austin Moldow maintained their Buy rating and $56 per share price target on Twitter after the company’s Analyst Day. They called Chief Financial Officer Anthony Noto’s presentation “confidence-inspiring” and said that it should provide some additional visibility for investors.
For example, they believe they will stop focusing on monthly active user growth in the short term. Additionally, they think that investors will begin to look for upside around monetization for non-monthly active users and transforming the platform into a “more mainstream, more useable and more ubiquitous” platform.
They note that there probably isn’t a quick fix for Twitter’s user growth problem, but they still like the stock because of what they say is “broadly-defined user base.” They also think user engagement “should have a long runway for measured growth.” Additionally, they think that monetizing non-monthly active users “feels very early.”
More clarity needed from Twitter
In their report also dated Nov. 13, 2014, Sterne Agee analysts Arvind Bhatia and Brett Strauser presented the opposite opinion, saying Twitter management did not provide enough clarity at the Analyst Day. They do think that investors are better able to understand that the micro-blogging platform’s reach is a lot bigger than the core user base that’s reported if logged-out users are included.
However, they want more information on how Twitter will be able to effectively monetize those logged-out users and how long it will take to do this successfully. As a result, they reiterated their Neutral rating on the company’s stock.
Management said that they’re targeting about $11 billion in annual revenue from the $1.3 billion annualized run rate this year, which would be a 35% to 62% compound annual growth rate. In order to achieve this goal, Twitter intends to quadruple the ad load, bringing it from 1.3% currently up to 5%.
They also want to double the user base from 285 million to 560 million. Additionally, they intend to monetize the more than 500 million logged-out users Twitter has and improve engagement by 300 basis points, which would bring it from 48% to 51% in the top 20 markets.
Management also increased their long term adjusted EBITDA margin target to between 40% and 45%. The previous target was between 35% and 40%.