Here’s a twist: Twitter stock gained following Thursday’s earnings report, and not only that but analysts from multiple firms have bumped up their price targets. The micro-blogging platform’s third quarter results showed more stability as engagement looked a little better, although bears are still not convinced that this is the turning point. Also while multiple firms raised their targets for Twitter stock, at least one firm lowered theirs.
Twitter stock hangs on stability
The biggest issue the micro-blogging platform has been facing since it went public is the lack of user growth. The growth during the third quarter certainly wasn’t stellar, but the company finally beat consensus for user growth. In fact, Twitter added 1 million more monthly active users than what Wall Street was looking for.
Canaccord Genuity analyst Michael Graham bumped up his price target for Twitter stock by $2 to $18 per share but maintained his Hold rating. He said the company’s profit outlook for next year suggests that management is optimistic about future revenues. They pointed to a number of improving user trends such as the acceleration in daily active user growth for the second quarter in a row. Daily active users increased 7%, while monthly active users grew 3%. The company also managed an acceleration in growth for tweet impression and time spent thanks to improvements in the home timeline and notifications.
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Twitter also announced that it is reshuffling its sales force, resulting in the implied guidance range being quite wide, Graham noted. The company is cutting its workforce by 9% and aims to be profitable on a GAAP basis next year. JPMorgan analyst Doug Anmuth believes that driving toward GAAP profitability will make the social network more appeal to a potential acquirer, although he thinks it is unlikely that it will be able to achieve this in 2017.
Still bearish on Twitter
Morgan Stanley analyst Brian Nowak raised his price target for Twitter stock to $13.50 from $13.25 per share because of the restructuring but maintained his Underweight rating. He said neither the third quarter results nor the implied fourth quarter guide was as bad as he had been expecting, but he still expects the company’s ad revenue growth to slow to 2.5% in the fourth quarter and to decline in the U.S. He noted that the third quarter marked the first time the platform’s U.S. ad revenue declined. He also sees downward revisions on the top line in the near future.
He notes that it is possible that Twitter will be acquired at some point but adds that it’s impossible to determine when, let alone if, that will happen. Nowak adds that valuation is very important in acquisitions, but he estimates that Twitter is priced comparably to Facebook at about 14 times 2017 adjusted EBITDA. Facebook is growing at more than 60% on the top line, he adds, while Twitter is growing only in the single digits. He notes that Yahoo and AOL both were trading in the single digit adjusted EBITDA multiples before deals were announced.
Goldman Sachs cuts Twitter stock targets
Goldman Sachs analyst Heath Terry trimmed his price target for Twitter stock by $1 to $22 per share and maintained his Buy rating in a note to investors on Friday. He still sees “significant value” in the micro-blogging platform’s user base, content and data even though the company has failed to realize the value.
Twitter stock had a bumpy day on Friday, climbing as high as $18 per share during regular trading hours after surging in extended trading Thursday night.