After refreshing his proprietary sampling of Twitter Inc (NYSE:TWTR) accounts to evaluate how engagement and monthly active users (MAUs) are tracking this quarter, Canaccord analyst Michael Graham remains sidelined, reiterating a Hold rating on TWTR with a price target of $18, which represents an almost 2% downside from where the shares last closed.
Graham’s sampling tracks the average engagement of the social media titan user base spanning throughout approximately 100 countries and then examines historical comparisons between growth in the engagement index compared to actual MAU growth to project MAU growth for the fourth quarter. Data thus far indicates TWTR’s engagement will rise 5.3% sequentially in the fourth quarter over the third quarter, and of that, the analyst believes around 25% is a reflection of new member growth and 75% is a result of engagement enhancements in the existing user base.
Upon determining these sampling results, the analyst believes the data suggests MAU growth in fourth-quarter will reach 1.4% sequentially, or 4.4 million net adds.
Overall, “While growth is still sluggish, if our sampling results prove consistent with reported results again this quarter, this should mitigate one risk for the stock in Q4. Management called out several improvements to engagement in Q3 from recent product changes, and we could be seeing some follow-through. However our optimism is tempered by the recent acqui-hire of Twitter’s sixth VP of Product in four and a half years,” Graham contends.
Moving forward, though engagement has made some strides, “business challenges still persist” and the analyst anticipates “Growth and engagement from Twitter’s user base beyond the levels we are seeing now may be needed to achieve these ambitions.”
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Michael Graham is ranked #217 out of 4,256 analysts. Graham has a 53% success rate and gains 9.1% in his yearly returns. However, when recommending TWTR, Graham loses 32.3% in average profits on the stock.
TipRanks analytics demonstrate TWTR as a Hold. Based on 28 analysts polled in the last 3 months, 5 rate a Buy on TWTR, 17 maintain a Hold, while 6 issue a Sell. The 12-month average price target stands at $17.53, marking a 4% downside from where the stock is currently trading.