- REUTERS/Cathal McNaughton
Twitter shares are tanking after the company’s disappointing quarterly financial results.
Monthly active users (MAUs) climbed to 320 million from 316 million last quarter. This was well short of the 324 million expected by analysts.
At $27.75, shares are down 11% from where they closed on Tuesday.
We thumbed through 13 research notes from Twitter analysts who reacted to the news. For the most part, they think investors should sit on the sidelines until there’s some more visibility.
But at least five analysts are more optimistic and argue that now’s a great time to be buying.
“We are holding onto our hope trade,” Pacific Crest’s Evan Wilson and Tyler Parker wrote. They have a $36 target on the stock.
“We believe the hiring of Jack Dorsey was the first step toward an improved product and repaired franchise,” Stifel’s Scott Devitt said. “As a founder, Jack has the freedom and vested interest to fix the product problem at this company … Twitter faces declining expectations and easing comps as it approaches 2016, which should be a perfect backdrop for a product-focused founder to look like a savior.”
Meanwhile, just one of these 13 analysts was outright bearish on the stock.
Price Target: $42 (down from $56)
Comment: “Moments is ‘just the start of bolder changes at Twitter’ as the company focuses on 1) disciplined execution 2) simplifying its services and 3) better communicating Twitter’s value. We see mgmt’s willingness to question and change traditional Twitter as a positive, but temper our expectations in 2016 as we await meaningful user engagement inflection (and remain bullish on the prospects of LT user and engagement improvement).”
Goldman Sachs: BULLISH
Price Target: $40
Comment: “Despite the slowdown in MAU growth and 4Q outlook below expectations, we continue to believe the accelerated pace of product innovation, including the recent launch of Moments, should improve ease of use and expand the audience.”
Pacific Crest: BULLISH
Price Target: $36 (down from $40)
Comment: “Three weeks in, our new CEO hope trade will take a step back due to disappointing Q4 guidance. However, given our old analysis of new CEO hires, it takes 90 days for investors to believe in a new direction. We still think Twitter’s MAU issues will be difficult to rectify, but we are maintaining our near-term bullish stance.”
Rating: Buy (up from Hold)
Price Target: $34
Comment: “We believe the hiring of Jack Dorsey was the first step toward an improved product and repaired franchise. As a founder, Jack has the freedom and vested interest to fix the product problem at this company. Our wish list: 1) make product easier to use, 2) offer better tools for curation, and 3) test / iterate core product extensions (e.g. Lists, Moments, Periscope, Vine). Twitter faces declining expectations and easing comps as it approaches 2016, which should be a perfect backdrop for a product-focused founder to look like a savior.”
Price Target: N/A
Rating: Equal Weight
Price Target: $33 (down from $40)
Comment: “While we are still concerned about the underlying fundamental financial trends, there does seem to be renewed focus and energy around new products and services at Twitter. With the expansion of video advertising, the early success of Moments, the push to monetize the 1/2 billion non logged in users we do see some reasons for optimism. We remain on the sidelines for now as we await more clarity on revenue growth for 2016, and any potential improvement in user growth.”
Wells Fargo: NEUTRAL
Rating: Market Perform
Price Target: $32 to $34 (down from $33 to $35)
Comment: “We view Twitter as a transformative social platform with opportunity to expand its audience scale, consumer value proposition and advertising utility. Our view is tempered by what we believe to be a rich valuation, complexity of the Twitter platform and potential challenges to meeting high investor expectations.”
Price Target: $32 (down from $35)
Comment: “While we believe many of the growth initiatives highlighted by ‘new’ CEO Jack Dorsey are promising, it remains less clear whether these will translate into more active user growth and engagement.”
Price Target: $30 (down from $33)
Comment: “While investors are hopeful that restructured leadership can engineer a revival via new products like Moments, as long as Twitter user growth remains stalled, it will be difficult for revenue to reaccelerate, muting the 3-5 year growth outlook.”
Price Target: $26
Comment: “The bottom line is that while TWTR certainly has potential, its user growth is weak, O&O revenue growth is slowing, and investors are going to be surprised by declining margins. And while we appreciate that a renewed product focus should positively impact usage, and that new advertising tools and partnerships should improve monetization, this is obviously a show-me story. “
Raymond James: NEUTRAL
Rating: Market Perform
Price Target: N/A
Comment: “While we are encouraged by efforts to improve Twitter for users and provide better measurement tools for advertisers, we believe the turnaround remains a multi-quarter effort and thus view risk/reward balanced.”
Price Target: N/A
Comment: “While 3Q EBITDA was 27% above the Street, Global MAUs decelerated 400bps y/y to +8% y/y or +1% q/q, which should mute investor enthusiasm, in our view. As a result, shares are likely remain stagnant until new product features, such as ‘Moments,’ or the company’s upcoming advertising campaigns, can produce evidence of higher user engagement.”
Morgan Stanley: BEARISH
Price Target: $22 (down from $24)
Comment: “To become more bullish, we look for signs of improvement around advertiser growth and TWTR’s ability to grow its share of ad budgets. TWTR is focused on 1) improving its advertiser unit offering (through initiatives like new video ads and promoted Moments), 2) improving ad measurement, attribution, and return on investment (through its DoubleClick partnership and dynamic ad retargeting pilot) and 3) growing its user base and as a result the scale it offers to advertisers (through a new TV ad campaign). We intend to monitor these efforts closely throughout the holiday advertising season and into the 2016 ad budgeting period.”