Twitter Flies After Q3 Earnings; Analysts Weigh In On What To Do With The Stock

Twitter Inc TWTR reported Thursday a top-and-bottom-line beat in its third-quarter results, but certain user metrics fell short of expectations.

Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

  • Goldman Sachs' Heath Terry maintains a Buy rating on Twitter's stock with a price target lifted from $43 to $48.
  • Barclays' Ross Sandler maintains at Underweight, unchanged $27 price target.
  • Pivotal Research Group's Brian Wieser maintains at Hold, price target lifted from $24 to $28.
  • Raymond James' Aaron Kessler maintains at Market Perform, no assigned price target.
  • Morgan Stanley's Brian Nowak maintains at Equal-Weight, unchanged $31 price target.
  • Oppenheimer's Jason Helfstein upgraded from Perform to Outperform with a new $37 price target.
  • Nomura's Mark Kelley maintains at Neutral, price target lifted from $30 to $33.

Goldman Sachs: Longer Term Picture

Twitter's earnings showed a net decline of nine million daily active users (DAUs) due to information quality initiatives, among other reasons, Terry said in a note. However, the information quality initiatives could bring a positive long-term impact to user growth, engagement and monetization that would translate to upside to revenue and profits versus current expectations.

Barclays: Making Strides

Twitter's report shows the company "continues to make strides" to improve its platform, Sandler said in a note. The company also deserves credit for delivering solid performance at a difficult time for the overall market.

Expectations for continued momentum is already reflected in the stock's valuation of 16 times 2019 estimated EBITDA, which is a premium to Facebook, Inc. FB and Alphabet Inc GOOG GOOGL, which both trade at 11 times 2019 estimated EBITDA.

Related Link: Twitter Is A Value Social Media Stock, Oppenheimer Says In Upgrade

Pivotal: Ongoing Progress

Twitter's report is consistent with recent momentum and fits in to a longer-term theme the company can succeed as a durable and highly differentiated social media platform, Wieser said in a note. It's likely Twitter will return to industry-level growth rates, but this is already factored into the stock at current levels.

Pivotal: 3 Positives And 2 Negatives

Kessler said in a note the three positive takeaways from Twitter's report include:

  • Acceleration of owned ad revenue from 29 percent in the second quarter to 36 percent.
  • U.S. ad revenue increased from 9 percent in the second quarter to 32 percent.
  • EBITDA of 39.4 percent beat expectations of 35.5 percent.

The one negative takeaway includes a decline of global MAU.

Overall, Kessler said Twitter's stock is fairly valued at 16 times 2019 estimated EBITDA, which is fair given expectations for a mid-teens longer-term revenue growth profile.

Morgan Stanley: More Monetization Ahead

Twitter's earnings shows how it's able to deliver a return on investment for advertisers and suggests management has more monetization levers available, Nowak said in a note. He said management deserves credit for a showing a 700-basis point acceleration in year-over-year owned and operated revenue growth. This should give investors confidence in the ad revenue growth outlook for 2019, but the company still needs to improve its business to command higher ad unit pricing.

Oppenheimer: Reasonable Value

Twitter's encouraging report shouldn't be considered part of a long-term favorable trend although the stabilization of pricing and expenses warrants a bullish stance on the stock, Helfstein said in a note. The company should be able to show small DAU gains and expenses should grow faster than revenue next year.

Twitter's stock offer investors "reasonable value" amid expectations for EBITDA to rise 50 percent faster through 2019 at 28 percent versus 18 percent.

Nomura: Healthier And Faster

Twitter's report shows the company is becoming "healthier" and a "faster" pace, Kelley said in a note. Encouragingly, DAUs posted a 9 percent year-over-year growth and this metric is "more important" than the MAU declines that's in focus.

Posted In: Aaron KesslerBarclaysBrian NowakBrian WieserDAUGoldman SachsHeath TerryJason HelsfteinMark KelleyMAUMorgan StanleyNomuraOppenheimerPivotal Research GroupRaymond JamesRoss Sandlersocial mediaAnalyst ColorEarningsNewsUpgradesPrice TargetTop StoriesAnalyst RatingsTechTrading Ideas

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