Wedbush analyst Michael Pachter is joining the earnings conversation on Twitter Inc (NYSE:TWTR) and Pandora Media Inc (NYSE:P) from differing perspectives. While the analyst believes the volatile election will be a driver of user engagement for Twitter, he remains critical on the complexity of the user experience and sees stock-based compensation as “excessively high.” With regards to Pandora, though the firm might have some short-term stumbles, the analyst highlights 2017 as a year of magnified profitability.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Michael Pachter is ranked #4,057 out of 4,382 analysts. Pachter has a 49% success rate and loses 3.3% in his yearly returns. When recommending TWTR, Pachter earns 0.0% in average profits on the stock. When recommending P, Pachter forfeits 7.4%.

Let’s dive in:

Twitter’s M&A Potential Remains Vague

As Twitter prepares to post its fourth-quarter results before market open this Thursday, February 9th, Pachter continues to be sidelined on the social media platform’s narrowed prospective upside, underscoring “stalling” user metrics coupled with “elevated” stock-based compensation (SBC) as his key concerns.

Therefore, the analyst reiterates a Neutral rating on shares of TWTR with a $14 price target, which represents a 22% decrease from current levels.

For the fourth quarter, though the analyst maintains caution on the stock’s prospects, he believes Twitter will either meet or top the high end of both guidance and consensus projections on back of election buzz, live event streaming, and a new focus on video. Pachter sets expectations for Twitter to hit $750 million in revenue, $185 million in adjusted EBITDA, and $0.13 in non-GAAP EPS, more confident than consensus estimates of $740 million in revenue, $182 million in adjusted EBITDA, and $0.12 in non-GAAP EPS. The analyst’s as well as consensus forecasts fall mid-range for implied guidance for revenue of $688 to $788 million, but anticipate a beat when considering guided adjusted EBITDA of $164 to $179 million.

However, Pachter notes, “Our top-line estimate contemplates y-o-y growth of 6%, below last quarter’s 8% and significantly below the levels seen in every quarter of 2015. Our estimates reflect an assumed ~5% yo-y user growth, coupled with ongoing reluctance by advertisers to allocate a heightened portion of ad spend as Twitter’s CPE (cost per engagement) remains high relative to others, and the user experience remains complicated.” A positive weighing in Twitter’s corner, the analyst believes user engagement has had an added advantage from recent fiery political discourse, which he deems “the primary catalyst” if MAU growth is higher this quarter.

Overall, “Twitter remains ‘the place to go’ for real-time information, and although management is clearly focused on profitability, improvements in user experience and costs remain limiting factors. While Twitter’s move into live streaming events is one way the platform can introduce new users to its features, we think that conversion of existing users remains minimal and the service is still too complicated to attract the average Internet user, despite multiple changes. In our view, there is no clear-cut potential buyer for Twitter,” Pachter contends.

TipRanks analytics exhibit TWTR as a Hold. Based on 20 analysts polled by TipRanks in the last 3 months, 2 rate a Buy on Twitter stock, 14 maintain a Hold, while 4 issue a Sell. The 12-month average price target stands at $16.31, marking a 9% downside from where the shares last closed.

Expect Pandora to Return to Path of Profitability in 2017

Pachter highlights a long-term bullish stance on Pandora in his preview of fourth-quarter earnings due this Thursday, February 9th after market close. Ahead of the print, the analyst reiterates an Outperform rating on P with a price target of $15, which represents a just under 15% increase from where the shares last closed.

For the fourth quarter, the analyst anticipates the music streaming firm will post “in line” results with his forecasts as well as its preannouncement. The analyst calls for $385 million in revenue, $(30) million in adjusted EBITDA and $(0.23) in EPS, more positive than consensus with estimates of $374 million in revenue, $(39) million in adjusted EBITDA, and $(0.21). The firm’s pre-announcement indicates the company anticipates to beat the high end of its non-GAAP guidance for revenue in the range of $362 to $374 million and adjusted EBITDA range of $(51) to $(39) million. Though the analyst anticipates listener hours have taken a 3.1% dip year-over-year, he anticipates ad revenue growth has seen a 10.2% surge, which he attributes to the firm’s recent, more aggressive advertising strategy.

Additionally, the analyst predicts, “[…] we think Pandora could easily surpass [our 2017 ad revenue estimates] should the company continue to execute. Additionally, driven by its commitment to reduce headcount by 7%, excluding Ticketfly employees, we expect Pandora to reach just above break-even EBITDA in 2017. Should on-demand outperform our initial expectations, this could drive profitability higher.”

Looking beyond the quarter, “We expect losses in the first half of 2017 as Pandora invests in on-demand music and transitions to a three-tiered subscription model. In addition to its new live events venture, its on-demand service and increasing ad pricing are Pandora’s strategic priorities. We believe that Pandora can convert at least 1 million Pandora Plus subscribers to on-demand and can attract 1 – 2 million net new U.S. on-demand subscribers in 2017, while up-selling ad-supported customers to its Pandora Plus service. We expect international expansion in 2018,” Pachter surmises.

TipRanks analytics indicate P as a Buy. Out of 14 analysts polled by TipRanks in the last 3 months, 7 are bullish on Pandora stock and 7 remain sidelined. With a return potential of nearly 16%, the stock’s consensus target price stands at $15.08.