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Looking Beyond Q3, Twitter's Q4 Could 'Make Or Break' The Company

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Looking Beyond Q3, Twitter's Q4 Could 'Make Or Break' The Company

Twitter Inc (NYSE: TWTR) stock has been all over the map in 2016 as wave after wave of buyout rumors has come and gone. However, with buyout chatter dying down for the most part, SunTrust analyst Robert Peck believes the company’s Q3 earnings report and management commentary could provide some important insight into Twitter’s critical Q4.

“We think there are several items Twitter may focus on during Thursday’s 3Q report: right-size the cost structure given the slower growth; elaborate on incremental growth strategies; and clarify management’s full-time commitment,” Peck explains.

Related Link: Who (If Anybody) Is Still Looking To Purchase Twitter?

According to Peck, Twitter’s cost structure was built on the assumption of much stronger growth than the company has delivered. The stagnant growth numbers have been disappointing for shareholders, but SunTrust also believes they now provide opportunity for cost-cutting. Peck anticipates Twitter could cut 8 percent of its workforce, a move that would save the company up to $100 million per year.

Peck points out that Facebook Inc (NASDAQ: FB) has eight times the number of daily active users as Twitter, yet its cost structure is much more efficient.

Peck notes that Twitter could also be facing another period of headline risk associated with management turnover driven by the company’s lack of traction on recent initiatives.

Overall, SunTrust believes the market is already anticipating a weak Q3 from Twitter, but Q4 could be a “make or break” quarter for the struggling social media giant.

The firm maintains a Hold rating and $18 price target for Twitter.

Latest Ratings for TWTR

DateFirmActionFromTo
Nov 2019DowngradesIn-LineUnderperform
Oct 2019MaintainsHold
Oct 2019MaintainsNeutral

View More Analyst Ratings for TWTR
View the Latest Analyst Ratings

Posted-In: Bob Peck SunTrustAnalyst Color Analyst Ratings Tech Best of Benzinga

 

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