The Pros And Cons Of Twitter's Q3 Beat

UBS upgraded Twitter Inc TWTR to Neutral and raised its price target from $14 to $21 after the company reported strong earnings results.

Analyst Eric Sheridan is encouraged by better engagement metrics as Twitter posted its fourth consecutive quarter with a double-digit daily active users growth.

As a result of better than expected earnings, Sheridan now sees Twitter as a stock with better risk-reward. Continued user engagement trends and better than expected margin trend line could lead to more upside. On the other hand, there is going to be a continued debate about short and long-term revenue trends, said Sheridan.

Positives And Negatives

He noticed some positive things, but there were also negatives in the quarter. Increasing DAU growth to 14 percent was one of the key positives in the Q3 earnings results. Sheridan also liked stabilizing ad revs trajectory, with strength in video and focused direct-response products. Self-serve channel returned to growth and effective cost per mille remained stable for the past three quarters, with click-through rate increase offsetting cost per engagement decline. One of the negative issues was 6.5 percent lower Q4 revenue guidance than the Wall Street's consensus. Higher Q4 expenses due to hiring and shifting of expenses from Q3 and lack of upside in monthly active users and the restating of historical MAU measures were also negative.

At time of publication, shares of Twitter were up 4.14 percent at $21.14.