Tesla Inc (TSLA), Twitter Inc (TWTR): The Tale of the Car Maker and Struggling Social Media Player


As earning season spins right along, analysts from Baird and Evercore ISI are sharing their two cents on Tesla Inc (NASDAQ:TSLA) and Twitter Inc (NYSE:TWTR). Baird encourages concerned investors worried about short-term waves circling Tesla shares to take advantage from a buyer’s standpoint before the fourth quarter print’s release. Conversely, Evercore ISI highlights some silver lining for Twitter, but ultimately determines this case is a more cautious one meriting a price target cut. Let’s take a closer look:

Tesla 4Q Print Indicates De-Risking Event; Time to Buy

Baird analyst Ben Kallo is chiming in from a point of rising assurance on Tesla, going as far as to say “Buy ahead of results,” with the auto maker’s fourth-quarter print due February 22nd after market close. Raising fourth-quarter projections as well as his 2017 model, pointing to deliveries and the Model 3 as key strengths for the company, the analyst reiterates a Buy rating on shares of TSLA with a $338 price target, which represents a 4% downside from where the stock is currently trading.

Anticipating Model 3 and Gigafactory production ramps progress updates will jump-start a surge in shares, the analyst now anticipates approximately 25k Model 3 deliveries in 2017 with even greater conviction that the car maker will be able to ramp production. However, the analyst adds that he does not anticipate “specific” guidance for the Model 3 in the fourth-quarter call. Kallo opines, “We expect less focus on the SCTY acquisition, although there may be short-term noise as expectations are calibrated. We believe the Q4 report is another de-risking event, and recommend investors own shares.”

“We believe several upcoming catalysts could drive the stock price higher. We think demand for the Model S will remain strong throughout 2016 in the U.S. and Europe. Additionally, TSLA has several significant milestones coming up over the next 18 months. Upcoming catalysts include:1) continued production ramp; 2) gross margin expansion; 3) gigafactory construction updates; 4) the start of Model 3 production; 5) Tesla Energy ramp; and 6) additional details about the Model 3 and potential introduction of the Model Y/additional products,” Kallo concludes, noting that any short-term concerns can translate to a compelling buying opportunity for Tesla shares.

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, four-star analyst Ben Kallo is ranked #1,125 out of 4,384 analysts. Kallo has a 47% success rate and realizes 4.3% in his annual returns. When suggesting TSLA, Kallo yields 29.2% in average profits on the stock.

TipRanks analytics exhibit TSLA as a Hold. Out of 14 analysts polled by TipRanks in the last 3 months, 5 are bullish on Tesla stock, 6 remain sidelined, and 3 are bearish on the stock. With a loss potential of 14%, the stock’s consensus target price stands at $230.73.

Twitter Not Likely to Deliver on Revenue Growth This Year

As Twitter shares stumble 11% following a rocky fourth-quarter print, Evercore ISI analyst Ken Sena is joining the apprehensive gaggle, reiterating a Hold rating on TWTR while trimming the price target from $17 to $16, which represents a 4% downside from where the shares last closed.

For the first quarter of 2017, the analyst has cut his revenue 17% to $525mm, indicating a 12% year-over-year decline as well as reducing adjusted EBITDA to $91mm, which would mark a 50% year-over-year decline. For 2017, the analyst has reigned in revenue 9% to $2.53 billion while lowering adjusted EBITDA 15% to $689m, denoting a 9% year-over-year decline.

Sena believes, “Twitter missed on revenues and substantially lowered expectations for 1Q 2017. This was softened to some degree by management providing a tempered spending outlook for the year on continued signs of favorable inflection within key user growth and engagement metrics. It was also accompanied by management laying out a course for 2017 that centers on a more comprehensive application of machine learning within its experience and the centralization of many products into its Explore offering (i.e., Moments, Search and Live Video).”

Though the positive strides management is taking under wing are not lost on the analyst, sometimes improvements simply do not come close enough in the larger spectrum. Overall, “Our view is that while this all sounds great, it is not likely enough to deliver revenue growth in 2017, as ad ROIs have proven insufficient, competition for brand spend is intensifying, and certain of Twitter’s ad products may cease to exist following further review. As such, we view the case for Twitter as being one based more on strategic rationale than on fundamental,” Sena surmises.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Ken Sena is ranked #479 out of 4,384 analysts. Sena has a 59% success rate and earns 9.1% in his yearly returns. However, when recommending TWTR, Sena loses 10.8% in average profits on the stock.

TipRanks analytics demonstrate TWTR as a Hold. Based on 21 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on TWTR stock, 14 maintain a Hold, while 4 issue a Sell. The 12-month average price target stands at $16.97, marking a 1% upside from where the stock is currently trading.