Twitter is scheduled to release its next earnings report tomorrow after closing bell, and Wall Street is clearly expecting good things. However, at least one firm is not, as it has cut its rating and price target ahead of that report. SunTrust analyst Robert Peck downgraded the micro-blogging platform from Buy to Neutral and lowered his price target from $58 to $50 per share.
In spite of that downgrade, shares of Twitter rose as much as 2.24% to $51.96 per share during regular trading hours today.
Concerns about Twitter’s valuation
The main reason firms that have rated Twitter as Neutral or Hold is because of the company’s valuation, and SunTrust is no different. Peck also cited valuation going into this week’s earnings report.
In addition to valuation, the analysts noted other risks like a decline in tweets per day and the company’s guidance for the number of net monthly active users in the June quarter. He also said he thinks sentiment going into tomorrow’s earnings report is “equally divided.” He thinks bulls are excited about Twitter’s recent improvements to products and growth in monthly active users but bears are more worried about guidance for monetization and users for the second quarter.
Peck thinks Twitter will remain range-bound for now because of this split sentiment.
Cramer bullish on Twitter
The Street reports that Jim Cramer has included Twitter as one of the core holdings of his Action Alerts PLUS Charitable Trust Portfolio. Cramer said he thinks Twitter is “partially out of the sentiment doghouse” heading into tomorrow’s earnings report. However, he also thinks it is “still largely under-owned relative to most large-cap Internet stocks.”
He thinks Twitter has the most catalysts of any company in its sector this year. Some of the catalysts he sees are Periscope, an acceleration in monthly active user growth due to the partnership with Google and embedded video and new features. He said his checks suggest that there is good uptake in the micro-blogging platform’s ad formats and features.
He thinks the partnership with Google will help Twitter post above-average growth in the coming years and that the company has “more revenue runway” than all other Internet companies. Cramer has a price target of $55 per share on Twitter.