Twitter Maintained Buy at Sun Trust Following Weak Guidance, Shares Tumble Pre-Market

Twitter TWTR came out with earnings last night that were mostly in-line, but issued guidance below consensus. Rob Peck from Sun Trust came out with a morning note with some highlights noted below. 1) Revenue and EBITDA beat while MAU (Monthly Average Users) of 284M were inline once adjusted for 1-2M negative impact from authentication bug in Asia 2) Guidance for 4Q is below consensus; CFO underscored that guidance is not overly conservative 3) Implied MAUs for 4Q show ~5M net adds at the high end, below expectations 4) Commentary and guidance "clean the decks" of consensus creep, creating a positive set up into Analyst day on Nov 12th thatcould provide more color on current trends as well as a vision and strategy for ~$10B in long term revenues He also maintained a Buy rating with a $58 Target. Mr Peck stated "Our revenue/EBITDA/EPS for 2014 goes to $1.37B/ $264M/$0.11 from $1.33B/$236M/$0.08 while 2015 goes to $2.26B/$519M/$0.40 from $2.18B/$514M/$0.36. We remain positive on the growth outlook for one of the few platforms of the Internet for three reasons: 1) resetting of investor expectations, 2) we anticipate a positiveanalyst day on Nov. 12th and; 3) early stages of monetization – ad load is meaningfully lower than peers. Our year end 2015 price target of $58 is based on 12x 2016E EV/Revenues, 40x EV/EBITDA and 0.5x EV/EBITDA/EBITDA growth vs. CAGRs of 71% and 129%." TWTR is trading down 14.43 percent in the pre-market following the weak guidance, at 41.45.