Twitter’s (NYSE:TWTR) honeymoon with Wall Street hit a big bump on Friday morning, when the company reported disappointing Q3 guidance and sequential monthly active users (MAU) growth trends.
Specifically, MAUs were 335M vs. consensus of 338.5M. US MAUs were flat Y/Y at 68M, while international MAUs were 267M vs. 258M a the year-ago period. Looking ahead, Twitter expects 3Q18 adjusted-EBITDA of $215-$235M and implied revenue of $632M-$712M, below both consensus EBITDA of $267M and revenue expectations of $714.6M.
As of this writing, TWTR shares are tumbling nearly 16% to $36.26.
Baird analyst Colin Sebastian commented, “Q2 results were largely in-line with expectations driven by accelerating ad engagements, favorable pricing trends for advertisers, a $30 million World Cup benefit, and improving user engagement. However, slower-than-anticpated expected Q3 revenue growth and a directional reversal in sequential trends likely blunt nearterm stock momentum. EBITDA and EPS were also above expectations due to the revenue beat, expense controls, and lower ETR related to tax reform (24% vs. 37% last year). DAUs grew 11% Y/Y (vs. +10% Y/Y in 1Q18), driven by organic growth, marketing, and product improvement, while MAUs declined slightly from Q1 partially reflecting platform health initiatives. Management once again emphasized information quality initiatives to improve content and safety, as well as the accelerating streaming partnership announcements (50 signed agreements in Q2 with ESPN, NBCUniversal, and Viacom).”
Net net, Sebastian remains sidelined on the TWTR stock, reiterating a Neutral rating with a price target of $33, which represents a potential downside of 23% from where the stock is currently trading.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Colin Sebastian has a yearly average return of 28.1% and a 78% success rate. Sebastian is ranked #10 out of 4842 analysts.
Out of the 35 analysts polled in the past 12 months, 8 rate Twitter stock a Buy, 19 rate the stock a Hold and 8 recommend a Sell. With a downside potential of 22%, the stock’s consensus target price stands at $33.52.