Twitter Inc (NYSE:TWTR) stock continued chugging along with a second day of gains after a wave of price target increases sprinkled with a few analyst upgrades. The general consensus on the company’s earnings report on Thursday morning is that it was better than past reports, but the company’s user growth has been such a sticking point for so long that analysts are waiting to see whether this really was the tipping point or only a fluke.
Twitter stock reaches new 52-week high
Twitter stock surged on Thursday after the company’s third-quarter earnings release and then soared to its highest level in over a year on Friday. The stock climbed as high as $21.63 after analysts from at least two firms upgraded it. However, both UBS and Stifel previously had the equivalent of a Sell rating on Twitter stock, so they’re both at the equivalent of a Neutral now.
Stifel analyst Scott Devitt raised his price target for the stock from $12 to $17 along with his upgrade, citing signs of stability in the company’s daily audience and business, although he also warned that “meaningful growth may continue to be elusive.” He noted that Twitter’s daily user base has been accelerating over the last seven quarters and grew in the double digits during the third quarter in most of the company’s top ad markets, including the U.S.
Reputed short-seller Spruce Point Capital Management released its latest short report this week. The firm is shorting Canadian dairy and grocery manufacturer Saputo. Spruce Point chief Ben Axler believes the company is entering a phase of declining growth and highlights the financial stress and growing challenges he sees it facing, not only in Canada but Read More
Further, he said that excluding TellApart and other ad products that have been de-emphasized, it appears that the company’s ad revenue declines are slowing while revenue from the company’s Top 100 clients jumped 23% year over year. He also pointed out that data licensing continues to be a bright spot, although its total addressable market remains uncertain. Overall, Devitt feels that Twitter’s profitability outlook for the next two years looks “brighter” and its revenue growth could turn positive in the first half of next year when it is up against easier comparisons.
Twitter stock still at Underperform
RBC Capital analyst Mark Mahaney said in his post-earnings note that although the company’s results were “less worse,” it’s not clear whether they were “better.” He maintained his Underperform rating and boosted his price target on Twitter stock from $14 to $18.
While Devitt didn’t seem to think the company’s revenue trends were too bad, Mahaney felt they were still bad. He noted that ad revenue was down 8% year over year and 18% in the U.S. Because advertising is a secular growth sector, he sees this as especially bad.
Mizuho analyst James Lee also maintained his Underperform rating on Twitter stock and boosted his price target from $14.50 to $16.50. He found the earnings results to be “encouraging” but added that he’s waiting to see “structural growth.” He was glad to see that user growth had stabilized and that cost efficiencies were better than expected.