Citi analyst Mark May weighed in yesterday on the internet search giant Google Inc (NASDAQ:GOOGL) and social media giant Twitter Inc (NYSE:TWTR), with mixed ratings.

Google Inc

The analyst estimated the company’s expenses associated with the Moonshots projects. He says, “Our analysis suggests that the company spent $4.65bn on Moonshots in 2014 and that expenses associated with these projects has grown at a 3-year CAGR of 48%.” For 2016, May believes these expenses will increase further. Given this background, he’s increasing his consolidated Opex assumptions and lowering his estimates for the company’s EBITDA and EPS.”

However, the analyst believes Google’s traditional “core” business remains strong and deserves higher multiples. May said, “While Core Google is growing revenue and EBITDA in the low-to-mid-teens range and margins have been declining slightly due to the changing revenue mix, we believe investors are paying 10x 2016E EBITDA for the core, whereas 12x seems warranted.”

May rates Google as a Buy and has increased his price target to $781, from his earlier target of $730. Just like May, 31 out of 33 analysts who have recently rated Google on TipRanks have given the company a Buy rating, while the remaining 2 have rated the stock as Hold. The consensus price target for the stock is $775.97.

Twitter Inc

May has maintained a neutral rating on Twitter and cut the price target to $30 (from $37). While cutting his advertising estimates for the company, the analyst noted, “Our conclusion is that our and consensus estimates, particularly with respect to U.S. ad revenue in CY16, may be too high as they implicitly assume meaningful increases in monetization that may prove difficult to realize.” He added, “It will be difficult for the stock to achieve sustained multiple expansion until user growth accelerates and/or revenue growth stabilizes.”

One of May’s key assumptions for Twitter’s stock is that the ad load is quite full at this point. He explains, “Based on our own Twitter feeds and those of our colleagues we informally surveyed, we think ad load in the U.S. is already close to 10% and, thus, has little room to increase meaningfully from here.” Ad load refers to the number of ads shown on the Twitter newsfeed as opposed to non-ad content.”

May has cut his forecast for Twitter’s 2016 revenue to $3.148 billion, from the earlier $3.29 billion. He’s also cut his 2016 EPS estimates to 34 cents, from the earlier estimate of 54 cents. Out of 27 analysts who have recently rated Twitter on TipRanks, 14 have given a Hold rating, while 12 have given it a Buy rating. One analyst has recommended the stock as a Sell.

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