Morgan Stanley analysts weighed in today with research reports on the micro-blogging giant Twitter Inc (NYSE:TWTR) and computing giant Microsoft Corporation (NASDAQ:MSFT). While one analyst is bearish on Twitter, stating user growth concerns, another is bullish on Microsoft due to durability of growth, operating margin expansion, and aggressive capital returns.
Brian Nowak, lead US Internet analyst for Morgan Stanley, reiterated an Underweight rating on shares of Twitter, and reduced the price target to $18 (from $24), which implies a downside of 5% from current levels.
Nowak explained, “Despite any potential benefit from “Moments” or TWTR’s 4Q TV ad campaign, engagement – time spent/user – is still falling 20%+ Y/Y. Further, our SensorTower app download data continue to point to a deterioration in user growth, with app downloads -3% in 4Q:15…compared to +5% in 4Q:14. We see weak user growth and engagement leading to lower monetization, as we reduce our ’16/’17 revenue by 1% and 3%, respectively. Given the growth in off-network revenue we are also sharpening our forward traffic acquisition cost modeling, which combined with the ad revenue cuts causes us to reduce non-GAAP EBITDA by 1% and 6% in ’16 and ’17. Our lower numbers reduce our DCF-based PT to $18 (8% downside) and we are still 26% below Street 2017 EBITDA.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian Nowak has a yearly average return of 6% and a 58.5% success rate. Nowak has a 37.3% average return when recommending TWTR, and is ranked #505 out of 3609 analysts.
Out of the 44 analysts polled by TipRanks, 18 rate Twitter stock a Buy, 23 rate the stock a Hold and 3 recommend a Sell. With a return potential of 95.5%, the stock’s consensus target price stands at $37.05.
Morgan Stanley analyst Keith Weiss reiterated an Overweight rating on shares of Microsoft, while raising the price target to $66 (from $57), which represents a potential upside of 23.8% from where the stock is currently trading.
Weiss explained that his bullish conviction about Microsoft was due to: “The company enters CY16 with: 1) real top-line drivers, 2) improving margins, and 3) strong capital return. At the same time, the risk from the ‘More Personal Computing’ (including Windows OEM and Nokia) has come down significantly, as that segment now represents just 15% of operating income. A ~3% dividend yield and ~10% FY15-FY18 EPS CAGR, drives an ~13% total return profile for MSFT – a premium to the S&P at ~8% that we believe should drive the MSFT multiple higher.”
The analyst concluded, “For the past 5 years, a struggling consumer PC business, false starts in mobile, cloud transitions and currency have kept EPS growth stagnant at Microsoft – we believe that trend line is poised to inflect upwards.”
According to data compiled by TipRanks.com, analyst Keith Weiss has a yearly average return of 17.1% and a 64.1% success rate. Weiss has a 0.3% average return when recommending MSFT, and is ranked #135 out of 3609
Out of the 27 analysts polled by TipRanks, 18 rate Microsoft stock a Buy, 7 rate the stock a Hold and 2 recommend Sell. With a return potential of 6.6%, the stock’s consensus target price stands at $56.81.