Analysts Set Expectations On Two Internet Earnings Plays: Twitter Inc (TWTR), Yahoo! Inc. (YHOO)


Analysts today offer an overview of what to expect from micro-blogging giant Twitter Inc (NYSE:TWTR) and online media giant Yahoo! Inc. (NASDAQ:YHOO), ahead of their upcoming earnings reports. While 90 companies in the S&P 500 have reported earnings, 33 have reported earnings that were better than expected, but sales that were worse, according to FactSet.

Twitter Inc

Canaccord analyst Michael Graham reiterated a Buy rating on shares of Twitter, while reducing the price target to $25 (from $38), ahead of the company’s fourth-quarter results and business outlook, which will be reported on Wednesday, February 10.

Graham noted, “With continued management turnover and declining engagement metrics in Q4, it is tough to gain any conviction that key user metrics will gain traction in the near term (and we are fairly certain it didn’t happen in Q4). Very slow user growth remains the primary negative, and our checks suggest this continued in Q4. Engagement also declined during Q4 on a minutes/user basis for the sixth straight quarter. For these reasons, we are lowering estimates significantly. However, we note that Twitter is essentially a media company growing revenue above 30% and EPS above 40% (on our lower estimates), and is trading at ~21x our lower 2017 EPS estimate, and we find this valuation/growth combination compelling, especially if the company can figure out a way to return to user growth later this year.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Graham has a yearly average return of 7.2% and a 49% success rate. Graham has a -20.1% average return when recommending TWTR, and is ranked #277 out of 3622 analysts.

Out of the 44 analysts polled by TipRanks, 19 rate Twitter stock a Buy, 22 rate the stock a Hold and 3 recommend a Sell. With a return potential of 84%, the stock’s consensus target price stands at $32.98.

Yahoo! Inc.

With Yahoo preparing to release fourth-quarter earnings tomorrow, Cantor analyst Youssef Squali weighed in today with his prediction. Squali reiterated a Buy rating on shares of Yahoo, with a price target of $51, which represents a potential upside of 76% from where the stock is currently trading.

Squali wrote, “More important than what management will say about 4Q:15 results and the potential restructuring, will be what it will say about the proposed reverse spin of core Yahoo! and YJ, or the potential sale of core. We believe 4Q:15 results will be in line with muted expectations. Within core Yahoo!, focus should be on the severity of declines in display revenue and search, as desktop declines continue to outweigh relative strength from Mavens (mobile, video, native, social). We expect management to unveil restructuring plans that could impact 10+% of Yahoo!’s workforce, as reported by several news outlets in early January. Despite CEO Mayer’s best efforts over the last 3+ years, Yahoo! remains challenged for growth in an industry that’s innovating at breakneck pace.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Youssef Squali has a yearly average return of 14% and a 57.7% success rate. Squali has a -5.0% average return when recommending YHOO, and is ranked #25 out of 3622 analysts.

Out of the 35 analysts polled by TipRanks, 21 rate Yahoo! stock a Buy, while 14 rate the stock a Hold. With a return potential of 52%, the stock’s consensus target price stands at $44.24.