Twitter Analyst Sees Risk To Q1 Guidance, But Expects 'Buying Opportunity Ahead'

Twitter Inc TWTR is scheduled to report its fourth-quarter results Thursday morning. An analyst at Deutsche Bank is bracing for sub-par first-quarter guidance, but is optimistic about 2020.

The Twitter Analyst

Lloyd Walmsley maintained a Hold rating on Twitter but increased the price target from $30 to $35.

The Twitter Thesis

The Street is modeling 2020 operating expense growth of 16% for Twitter, translating to consensus EBITDA forecast of $1.38 billion compared to Deutsche Bank's $1.25 million estimate, Walmsley said in a note. The analyst also sees risks to the first-quarter revenue guidance, as Twitter has been seeing issues with app install ads overindexing to the first quarter.

Give the deceleration in fourth-quarter U.S. revenue reported by Facebook, Inc. FB and Alphabet IncGOOGL, Walmsley said Twitter's relatively large exposure to brand spend is somewhat at risk.

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However, the size of Twitter's U.S. ad business, estimated at $1.6 billion in 2019, makes it more levered to execution than industry trends.

"Despite our caution, we think this is well understood by investors, especially the likelihood that opex guidance comes in above consensus estimates," Walmsley wrote in the note.

The analyst expects monetizable DAU growth to remain robust in 2020, with the 2020 event landscape potentially driving monetizable DAU and revenue growth.

Following a resetting of Street numbers, the analyst sees a buying opportunity ahead of numerous 2020 catalysts for the stock, including the 2020 U.S. election cycle, Summer Olympics in Japan, Euro Cup and Trump's obsession with the platform.

Deutsche Bank attributed its neutral stance to its view that investors may get a more attractive point on any guidance-related pullback.

TWTR Price Action

Twitter shares traded higher by 2.75% to $33.98 at time of publication.