The market can be a brutal place. Sometimes, it’s “What have you done for me lately?” Other times, it’s “What are you going to do next?” Unfortunately for investors in Twitter (TWTR), the answer to the latter question disappointed: Though the social media giant grew its revenues and beat estimates, Wall Street was not thrilled with its guidance.
Specifically, the company posted revenues of $909 million and earnings of 33 cents per share, in the October-December quarter, beating Street expectations of 25 cents per share and revenue of $867 million. However, investors appear to be concerned that Twitter is seemingly expecting a slightly less successful 2019. In its guidance, the company offered a revenue range of $715 million to $775 million against analyst consensus of $764.9 million. Furthermore, Twitter said that it anticipates increasing its operating expenses by 20% this year to address its “existing priorities of health, conversation, revenue product and sales, and platform.” Investors aren’t typically so keen on such big bumps in spending.
Baird’s top analyst Colin Sebastian commented, “At first glance, we are encouraged by ongoing positive revenue and mDAU trajectory with strong Q4 results; however, management’s guidance suggests higher levels of platform investment amid a slowdown in revenue growth. Q4 results beat consensus expectations on the top- and bottom-lines, driven by strong growth in advertising revenue and stable mDAU growth trends. DAUs grew 9% Y/ Y (vs. +9% Y/Y in 3Q18), showing improving engagement trends despite ongoing declines in MAUs. Looking ahead, soft Q1 guidance and a significant step-up in operating expenses for FY19 suggest platform health initiatives remain an ongoing priority, weighing heavily on margins in the near term.”
Sebastian reiterates a Neutral rating on TTWR stock with a price target of $35, which represents a slight upside potential from current levels.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Colin Sebastian has a yearly average return of 21.5% and a 68% success rate. Sebastian has a average return when recommending TWTR, and is ranked #33 out of 5153 analysts.
Overall, TWTR has a cautiously optimistic Moderate Buy consensus rating from the Street. This breaks down into 6 ‘buy’, 6 ‘hold’ and 2 ‘sell’ ratings in the last three months. We can also see from TipRanks that the average analyst price target is $34.42 – 11% upside from the current share price. (See TWTR’s price targets and analyst ratings on TipRanks)