Technology giants Twitter Inc (NYSE:TWTR) and Netflix, Inc. (NASDAQ:NFLX) were both in the headlines yesterday as Twitter is expected to make some big management announcements and Netflix is instituting content changes due to contract revisions. As a result, both technology giants experienced movement in yesterday’s trading while analysts weighed in.
Social media company Twitter jumped almost 4% in trading yesterday after SunTrust analyst Robert Peck upgraded his rating on the stock from Neutral to Buy with a price target of $38, citing that sentiment is low and he predicts a number of upcoming catalysts. The analyst says he is “cautiously optimistic” on Twitter due to “a series of positive catalysts, and attractive valuation with strategic floor.”
Peck’s upgrade on Twitter comes just a few weeks after the analyst reiterated Neutral rating on the stock, citing his belief that the company will make interim CEO Jack Dorsey into the permanent leader of the company. Since Dorsey is also the CEO of Square, Peck noted that it “is unclear how institutional investors will react to a permanent CEO who is also the CEO of a pre-IPO company.”
However, now Peck seems to have had a change of heart and believes the announcement of a new CEO serves as a positive catalyst for Twitter. He thinks the announcement will come as soon as Labor Day weekend. As he stated before, Peck believes “the company is likely to announce a Triumvirate of leadership, with: Jack Dorsey as CEO, Adam Bain as COO / President, and Ev Williams with more board influence (perhaps Chairman).”
Peck highlights other catalysts that he believes will help boost Twitter stock, such as the company’s potential to monetize through new ad products, new products and deals which could reignite monthly user and engagement growth, and the announcement of a new board by the end of the year.
One new product Twitter plans to launch in the next few weeks is “Project Lightening,” which is meant to increase user engagement by collecting the best tweets surrounding a certain topic.
Overall, Robert Peck has a 55% success rate recommending stocks and a +7.8% average return per recommendation when measured over a one-year horizon and no benchmark.
Out of 26 analysts polled by TipRanks within the past three months, 12 analysts are bullish on Twitter and 14 are neutral. The average 12-month price target for the company is $41.52, marking a 49.41% potential upside from where the stock last closed.
Video streaming company Netflix fell over 2% in trading yesterday after the company announced that it will not renew its content contract with Lionsgate owned company, Epix. Instead, Epix will now provide its content to rival video streaming website Hulu.
Despite the slight stock drop, Raymond James analyst Justin Patterson reiterated an Outperform rating on Netflix on August 31, citing that the loss won’t be detrimental to the company, especially since it has “materially improved” its original content this year.
The analyst noted, “Netflix has increasingly signaled throughout 2015 that its focus is on original content. With Epix available on numerous competing solutions (e.g. Amazon Prime, Sling, and now Hulu), there was little incentive to renew; Epix was not exclusive.” Furthermore, “Netflix can now shift content dollars that would have gone to movies to more original content such as movies with Brad Pitt, Angelina Jolie, and Ricky Gervais and programming.”
Patterson also touched on Netflix’s deal with Disney, which is slated to start in 2016, commenting how it also offsets the deal expiration with Epix. The analyst noted, “In December 2012, Netflix acquired exclusive U.S. first-run rights to Disney films that begin in 2016 (three year deal). In other words, Netflix will be replacing Epix with Disney’s slate of Pixar, Marvel, and Star Wars movies. We view Disney as a step-up from the Epix deal both in terms of exclusivity (recall Epix was not exclusive) and content (Pixar, Marvel, and Star Wars garner large audiences).”
On average, Justin Patterson has a 60% success rate recommending stocks and a +4.5% average return per recommendation when measured over a one-year horizon and no benchmark.
Out of 26 analysts polled by TipRanks within the past three months, 20 analysts are bullish on Netflix, 4 are neutral, and 2 are bearish. The average 12-month price target on the company is $122.43, marking a 6.43% potential upside from where shares last closed.