Twitter Takeover Speculation Likely To Provide Support For The Stock

Axiom believes takeover speculation on Twitter Inc TWTR will continue to keep investors interest in the stock.

The firm boosted its 2017 and 2018 EBITDA estimates by 7 percent following the third quarter results beat. As a result, the target price is increased from $16 to $18 while analyst Victor Anthony kept a Hold rating.

Since going public in November 2013, Twitter has added 76 million average monthly active users (MAU) reach 317 million at the end of September quarter, representing a growth of 31.54 percent, which is far less than its rival.

The brokerage listed the following factors after reviewing the September quarter results for reaching its investment thesis:

• The social media company has 15 live events that are under active negotiations.
• Core O&O revenue uptick missed Axiom's estimates, decelerating from 15 percent in second quarter to 9 percent.
• Revenue outlook implied further revenue deceleration pace in the fourth quarter.
• Total revenue growth was only 1 percent, suggesting that ad growth would have fallen 2 percent.

In a note, Anthony said, "The sales headcount reduction is likely to lead to ad revenue variability that could put 4Q revenue estimates at risk. We have increased our '17 & '18 Adj. EBITDA estimates and increased our price target to $18 from $16. Persistent M&A speculation is likely to keep a floor on the shares in the midteens."