The tech-verse is rumbling with news as Apple Inc. (NASDAQ:AAPL) had a grand unveiling for its latest additions to the MacBook Pro family and Twitter Inc (NYSE:TWTR) beat the Street in its third financial quarter. See what two of Wall Street’s top analysts are saying about why Apple remains a top pick and why despite the beat things look a little less bright for Twitter:
Yesterday afternoon, Apple hosted a special event where the tech titan unveiled three new MacBook Pros and introduced a fresh feature deemed Touch Bar that is now an element in these upgraded models. The most recent members joining the MacBook Pro family come in the customary silver shade, but also in a new space gray option. Additionally, the “Apple TV ecosystem” will include a “TV” app to its claim. Furthermore, Touch ID, for log in and Apple Pay, has been brought over to the Mac side.
In reaction, top analyst Brian White at Drexel Hamilton believes that “the MacBook Pro family as long overdue for an upgrade” and commends the redesign for “being thinner, lighter and delivering better performance.” As such, the analyst reiterates a Buy rating on shares of AAPL with a $185 price target, which represents a 62% increase from where the stock is currently trading.
The analyst asserts, “The biggest innovation of this launch was the introduction of Touch Bar that is embedded in two of the new MacBook Pro models. We believe Touch Bar is a good example of how Apple’s financial resources and innovation can differentiate it from competitors. Essentially, Touch Bar replaces the antiquated function keys of the past with a multi-touch Retina Display above the keyboard, changing based on what the user is doing.”
“Apple remains our top pick for H2:2016 given our view that the sales, profit and iPhone cycle have bottomed, while valuation remains depressed and we expect the iPhone 7 cycle will return the iPhone franchise to growth,” White contends.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Brian White has achieved a high ranking of #88 out of 4,188 analysts. White upholds a 58% success rate and garners 8.8% in his annual returns. When recommending AAPL, White earns 19.9% in average profits on the stock.
TipRanks analytics exhibit AAPL as a Strong Buy. Based on 34 analysts polled in the last 3 months, 28 rate a Buy on AAPL, 5 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $130.47, marking a nearly 14% upside from where the shares last closed.
Last evening, Twitter posted an earnings beat for its third-quarter that shows the social networking giant is “eyeing profitability.” Yet, top analyst Mark Mahaney at RBC Capital remains bearish on the company’s long-term prospects as “growth continues to fall” and therefore reiterates an Underperform rating on TWTR with a price target of $14, which represents just under a 20% downside from where the shares last closed.
TWTR brought in revenue of $616MM that outclassed the Street’s $604MM, which Mahaney notes “importantly” is coupled with ad revenues of $545MM above estimates of $536MM. Meanwhile, TWTR’s adjusted EBITDA of $181MM denotes a better-than-anticipated 29% margin, hitting ahead of the Street’s $150MM.
With regards to TWTR’s monthly active users (MAUs) and daily active users (DAUs), the company posted 317MM, topping the Street’s estimate of 316MM as the U.S. jumped from 1MM to 67MM and internationally, users increased 3MM. However, ad revenue growth continues its sharp, downward spiral, “now down to single digits,” compared to 56% growth back in 2015.
Management’s implied revenue guidance for fourth quarter of $733 to $741MM fell 2% under consensus at the mid-point, with EBITDA of $163 to $178MM falling 13% under consensus. The analyst adds, “Mgmt noted uncertainty going into Q4 as they restructure their sales force and reduce headcount by 9%.” Fourth quarter guidance also projects even greater ad revenue deceleration.
Subsequently, Mahaney has reduced his 2017 revenue 7% to $2.7 billion and his EBITDA projection is lowered 6% to $796MM.
Mahaney opines, “Accelerating growth in DAUs, Tweet impressions & time spent were a positive; while a 9% RIF was a negative.”
One of the analyst’s largest concerns is a clear lack of clarity for “when/if product/UI changes can sustainably stabilize or reaccelerate User & Usage.” Thus far, Mahaney’s channel checks and survey research are not offering “convincing evidence” that a significant enough amount of advertisers will invest “meaningful $s.”
“Twitter believes it can command premium ad pricing, but its dramatic Ad Rev deceleration doesn’t support that. We have believed that Twitter’s lack of real-time commercial intent (a la Google) and detailed, authentic profiles (a la FB) will eventually limit growth. That is clearly happening now – we see mid-single digit revenue growth for TWTR in Q4 and ‘17,” Mahaney concludes.
Mark Mahaney has a very good TipRanks score with a 69% success rate and he stands at #3 out of 4,188 on the analyst leaderboard. Mahaney realizes 19.9% in his yearly returns. When suggesting TWTR, Mahaney yields 5.9% in average profits on the stock.
TipRanks analytics demonstrate TWTR as a Hold. Based on 24 analysts polled in the last 3 months, 3 rate a Buy on TWTR, 14 maintain a Hold, while 7 issue a Sell. The consensus price target stands at $17.09, marking a nearly 2% downside from where the stock is currently trading.