- REUTERS/Rebecca Cook
Many analysts are now more bearish on Twitter after the company’s disappointing first-quarter results on Tuesday.
To recap, the social network reported stronger-than-expected adjusted earnings of $0.15 per share. But revenue missed estimates, even as they grew 36% year-on-year to $595 million.
Twitter’s guidance for second-quarter revenue was also light, at a range of $590 million to $610 million versus $677.6 million expected.
Unlike previous earnings results, Twitter beat on monthly-active user growth, up 310,000 versus 305,000 in Q4 2015.
Twitter said its revenue was at the low end of its forecast because brand marketers that advertise on the social network didn’t ramp up spending as quickly as it expected.
And now, a number of analysts are concerned that competitors like Facebook and Snapchat will eat Twitter’s lunch.
Before the market open, the company’s shares were down 14% to about $15.18.
Here’s a roundup of some of the analyst commentary (all emphasis is ours):
Morgan Stanley: NEUTRAL
Price Target: $14.50
Comment: “We see this steep deceleration [in core on-platform ad revenue] continuing to pressure the multiple investors are willing to pay for TWTR as we now see TWTR’s core on-platform ad revenue growing at a slower rate than GOOGL’s Website business and Facebook’s ad business in 2016, despite TWTR being 1/30th and 1/12th the size, respectively. Note too that for now we are assuming TWTR’s ad business re-accelerates in the back half (due to the NFL, presidential election and the Rio Olympics)… which, if advertiser demand doesn’t improve, still could be aggressive.”
Deutsche Bank: BULLISH
Price Target: $23 (cut from $25)
Comment: “The commentary around the macro advertising market validates our thesis that 1Q trends are slowing, and that pockets of weakness are emerging, even if TWTR is seeing worse trends than others (GOOGL/FB). We are trimming our revenue and EBITDA estimates for 2017 by around 10%. At $15, or $11B in market cap, we think there is strategic asset value at TWTR. The only catalyst to get TWTR shares turned back up is stabilizing revenue growth, which we see showing up in 2H16.
Pacific Crest: NEUTRAL
Rating: Sector Weight
Price Target: NA
Comment: “Macro commentary is worrisome for the space. Twitter’s comment about a relatively healthy overall ad environment, but a slowdown in tech ad spending, is somewhat worrisome on the back of similar comments from Yahoo!. This very well may be the weak performers in the space pointing fingers, but we were watching for the potential impact on the end of VC welfare on ad spending.
Raymond James: BULLISH
Price Target: $19 (cut from $25)
Comment: “Twitter remains early in its turnaround plan, and we continue to expect increasing product improvements and advertising monetization improvements (i.e., targeting, measurement) in the back half of the year and into 2017. While disappointed with the lower revenue outlook, we maintain our Outperform rating as we believe shares at ~$15 after hours (9x 2017 EBITDA) largely reflect the lower outlook and improved execution in late 2016 and into 2017 could serve as a catalyst.”
Wells Fargo: BULLISH
Price Target: NA
Comment: “Management offered broadly positive commentary on the impact of new product initiatives designed to grow its user base and deepen engagement, though printed Monthly Active Users and lukewarm forward commentary (e.g. expect no significant Olympics catalyst) will likely dispel any thesis that a positive user growth inflection point is in the making.“
Price Target: NA
Comment: “TWTR is now losing ad share to other social channels. Meanwhile, large online media platforms that perform news aggregation are causing reduced usage. Enhanced demographic targeting and verification for new video ad formats will not launch until 3Q, which could cause other outlets (FB, IG, Snapchat) to gain more share around large events such as the Olympics. We see limited near- term catalysts until investors gain better visibility around new products re-accelerating users and revenue.
RBC Capital Markets: NEUTRAL
Rating: Sector Perform
Price Target: $20 (cut from $23)
Comment: “Our broad concerns remain two-fold: 1) It’s not clear when/if product/UI changes can stabilize or reaccelerate User & Usage metrics. 2) Channel checks and our last three surveys don’t provide convincing evidence that a substantial number of advertisers will commit meaningful $s to TWTR.
Our surveys have actually showed declining advertiser interest. Our concern for some time has been that Twitter’s lack of real-time commercial intent (a la Google) or detailed, authentic profiles (a la FB) will eventually limit TWTR’s growth.”
Price Target: $17 (cut from $20)
Comment: “We have never recommended shares of TWTR and we don’t think investors should buy now either. Beyond obviously still being a show-me story, we remain concerned that TWTR’s competitive position is weakening. We continue to believe that TWTR is in something of a race against the clock. It needs to prove that it can fix its product issues before users (both creators and consumers of content) leave and go to other networks for good.
There is still a chance for a turnaround but TWTR needs to fix the “low-hanging fruit” much more quickly than it has in the past.”