Analysts are weighing in from the sidelines on technology players Glu Mobile Inc. (NASDAQ:GLUU) and Twitter Inc (NYSE:TWTR) following recent lukewarm fourth-quarter results that have not instilled investors with much confidence. However, though Canaccord is cautious on Glu amid a time of restructuring, the analyst sees a light at the end of the tunnel. More disappointed is one of Wall Street’s top analysts at Baird, who warns against persisting pressures on Twitter’s revenue. Lets dive in:
Glu Forecast: Cautious with a Chance of Upside
Canaccord analyst Michael Graham recognizes a solid performance from Glu in its fourth quarter results released yesterday and is cautiously optimistic on the mobile game maker’s prospects moving forward in a year set to be anchored in fresh investment strategy. However, investors were not as impressed, with shares sharply declining close to 16% yesterday and on an approximate 8% dip today.
For now, the analyst reiterates a Hold rating on shares of GLUU with a $3 price target, which represents a 30% increase from where the stock is currently trading.
Positively, following five-quarters of “double-digit declines,” Glu’s bookings flattened year-over-year this quarter, with first quarter guidance signifying a flat quarter to proceed as well as “re-acceleration” anticipated for the year’s guidance.
Overall, “Glu reported a pretty strong Q4, though spent more time outlining its road ahead with a new strategy. The company has admittedly undergone a few of these, but we believe this restructuring has promise in creating a more predictable and sustainable business. Two underlying details stand out: 1) GLUU is reducing its headcount, shuttering studios, and opening a more centralized megastudio; and 2) GLUU is employing a number of ‘creative leaders’ to prototype their unique ideas. We believe these strategies could lead to a more nimble process, where teams can pivot, reduce losses from unproven ideas, and focus on platform (growth) games. We remain cautious on GLUU given its early phase in executing on this new direction, but believe an investment year has a reasonable chance of producing future top-line growth,” Graham concludes.
Moving forward, with 2017 set to be a year focused on investment, the analyst sees upside potential for 2018.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Michael Graham is ranked #144 out of 4,384 analysts. Graham has a 58% success rate and gains 10.8% in his yearly returns. However, when recommending GLUU, Graham loses 8.3% in average profits on the stock.
TipRanks analytics exhibit GLUU as a Hold. Out of 5 analysts polled by TipRanks in the last 3 months, 1 is bullish on Glu stock and 4 remain sidelined. With a return potential of 4%, the stock’s consensus target price stands at $2.59.
Twitter Forecast: Prepare for More Revenue Headwinds in 2017
Twitter shares are falling almost 12% after the social media platform posted a fourth-quarter that came up short of expectations, expectations which top analyst Colin Sebastian at Baird critically notes were already “tepid.” On the heels of the disappointing results, the analyst reiterates a Neutral rating on TWTR with a price target of $17, which represents a just under 3% from where the shares last closed.
For the fourth quarter, TWTR posted a 1% year-over-year rise in revenue to $717 million, compared to revenue that surged 8% forward just last quarter. The analyst notes revenue underwhelmed “very modest growth targets” with consensus calling for 4% year-over-year growth to $739.7 million, as well as under the midpoint of implied revenue guidance of $687 to $787 million.
Meanwhile, ad revenues took a 1% year-over-year dip to $638 million, the first decrease Twitter has seen as a public company, missing consensus expectations of $657 million. Domestic revenue also declined 5% year-over-year. A strength for Twitter lies in its ad engagements that rose 151% year-over-year, compared to last quarter’s 91% year-over-year increase, but CPE (pricing) sunk 60% year-over-year, more than last quarter’s 44% year-over-year drop.
However, non-GAAP EBITDA of $215 million with a strong 30% margin outclassed consensus of $179.76 million as well as guidance of $163 to $178 million, which the analyst attributes to restructuring cost-control methods. Accordingly, non-GAAP EPS of $0.16 also beat consensus of $0.12.
Sebastian sees “Some green shoots in user engagement” with “video [as] a silver-lining,” as monthly active users of 319 million aligned with consensus expectations and were indicative of “slow but steady growth.” Daily active user growth accelerated to 11% year-over-year compared to 7% last quarter.
Moving forward, “Revenue growth likely to continue to lag audience growth, reflecting continued competitive pressures. In the press-release, the company indicated revenue growth will remain below audience growth in 2017 and “could now be further impacted” by escalating competition for digital ad dollars and internal re-evaluation of revenue product portfolio (direct-response ad formats declined Y/Y in 4Q16 due to decrease in O/O app download formats and a decline in Promoted Tweet ad format). To offset the decline in DR/Promoted Tweets, the company plans to more aggressively grow data licensing revenue in FY17, and expand the Twitter Amplify open video beta to select international markets in 1H17 and global availability by YE17,” Sebastian surmises.
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 Colin Sebastian is ranked #21 out of 4,384 analysts. Sebastian upholds a 76% success rate and garners 17.6% in his annual returns. When recommending TWTR, Graham earns 0.0% in average profits on the stock.
TipRanks analytics indicate TWTR as a Hold. Based on 20 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on TWTR stock, 13 maintain a Hold, and 4 issue a Sell. The 12-month average price target stands at $16.97, marking a nearly 1% upside from where the stock is currently trading.
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