As the earnings season kicks off with reports from major internet companies, Axiom analyst Victor Anthony came out with commentary on micro-blogging giant Twitter Inc (NYSE:TWTR) and social media giant Facebook Inc (NASDAQ:FB).
Analyst Victor Anthony reiterated a Buy rating on shares of Twitter, while reducing the price target to $33 (from $36), as the the next key milestone for the company will be its fourth-quarter earnings call on February 10.
Anthony observed, “For 4Q15 we estimate revenues of $715M (+49.3%) and Adj. EBITDA of $178M (24.9% margin), slightly above the consensus revenue of $710M and Adj. EBITDA of $176M, estimates, which we see as achievable. For 2016, there is lingering concern that revenue guidance could come in below consensus of $3.22B. We agree and have modeled revenues of $3.01B but believe that that expectation has made its way into the stock.”
The analyst concluded, “No sense in fighting reality. However, we do see reasons to be optimistic over the coming two years, which would make buying into the stock at current levels (3.8x sales) look prescient. The Alphabet/Google relationship is rolling out and should “over time” help drive MAU growth, which should drive a rerating of the shares. Periscope integration should help. Recent thirdparty data showed growth of time spent on Twitter in December vs. several prior months of decline and an improvement in time spent per user.”
According to TipRanks.com, a site that tracks and ranks analysts and bloggers on their predictions, analyst Victor Anthony has a yearly average return of 9.7% and a 52% success rate. Anthony has a -14.9% average return when recommending TWTR, and is ranked #147 out of 3579 analysts.
Out of the 29 analysts polled by TipRanks in the last 3 months, 10 rate Twitter stock a Buy, 17 rate the stock a Hold and 2 recommend a Sell. With a return potential of 81.50%, the stock’s consensus target price stands at $32.74.
In addition, Anthony reiterated a Buy rating on shares of Facebook, with a price target of $126, as the company will be reporting fourth-quarter results next Wednesday, January 27 post market close. According to TipRanks, Anthony has a 49.6% average return when recommending Facebook.
Anthony wrote, “We expect another strong quarter of ad revenue growth driven by the ongoing shift to mobile, where pricing is higher, video ads, higher contribution from Instagram, and FAN, which had a $1B gross revenue run-rate quarter. We are estimating revenues of $5.37B, +39% YoY, and Non-GAAP EPS of $0.66 vs. consensus $5.37B and $0.68 respectively. We model ad revenues of $5.18B, +44.2% YoY (+20.5% QoQ), based on a 2.3% QoQ increase in core ad impressions (+1 6% YoY), an 18% QoQ increase in core pricing (+24% YoY), and a $147M revenue contribution from Instagram.”
The analyst concluded, “We continue to recommend that investors buy the stock and hold for the longer-term as the core remains strong and estimates have yet to reflect contribution from Messenger, VR, WhatsApp, and the potential for FB to capture a meaningful slice of TV ad budgets through video ads, ecommerce & Search optionality, and the longer-term benefit of expanding Internet usage through Internet.org.”