Twitter Inc (NYSE:TWTR) shares plunged after the company’s last earnings report earlier this week, and things don’t seem to be looking up any time soon. Analysts at Sterne Agee call Twitter’s results “decent” but add that the mixed results obviously weren’t enough to convince investors to dive in yet.
Meanwhile analysts at FBN aren’t ready to give up on the company yet.
Buy Twitter on weakness: FBN
In a report dated Oct. 28, 2014, FBN analyst Shebly Seyrafi maintained their Outperform rating and $60 per share price target. The analyst suggested that Twitter might be a good buy because of “overreaction” to the company’s mixed results.
The micro-blogging platform again disappointed Wall Street on monthly active user growth, coming up just shy of what analysts had been wanting. They had been looking for 285 million monthly active users, but Twitter reported 284 million.
In addition to the disappointment on user growth, the FBN analyst said investors probably weren’t thrilled with the provided guidance. According to Seyrafi, Twitter’s guidance implies that there will be a “material deceleration in monetization.” This is because management said they expected a 28% to 30% quarter over quarter growth rate in ad revenue per thousand Timeline views. That’s about a 54% year over year growth rate, compared to the previous two quarters’ growth rates of 80% to 100%.
Twitter not so bad after all
The analyst doesn’t think things are as bad for Twitter as Wall Street thinks, however. Seyrafi believes management is being conservative in its guidance for monetization. He also pointed out that monthly active user growth is still over 20% year over year.
In addition, the FBN analyst points out that Twitter’s international ad revenue grew by 166% year over year in the third quarter. That was nearly double ad revenue growth in the U.S., which was 88% year over year. Also international ad revenue per thousand Timeline views rose by 133% year over year, which was again almost double the growth in the U.S. of 66%.
Also the analyst stated that Twitter saw strong growth in the Asia Pacific region and Europe, the Middle East and Africa as it expanded into new regions during the third quarter.
Twitter estimates raised by Sterne Agee
Analysts at Sterne Agee are less positive on Twitter because of the company’s high valuation. However, they did increase their estimates for the company based on this week’s earnings report. In their report dated Oct. 28, 2014, analysts Arvind Bhatia and Brett Strauser note that Twitter’s monetization metrics continue to be strong but that clearly investors are worried more about user growth than monetization.
Twitter management has been trying to focus investors’ attention on logged-out users as well as monthly active growth. By doing that, they essentially double or triple the company’s reach. In addition, management sees logged-out users as being just as valuable in terms of monetization as those who are logged in. The Sterne Agee team thinks investors are skeptical of this view, however.
Nonetheless, they increased their full year revenue estimate from $1.34 billion to $1.38 billion and their full year EBITDA estimate from $232.9 million to $269 million. Their 2015 full year revenue estimate moves from $2.19 billion to $2.3 billion, and their 2015 EBITDA estimate moves from $503.6 million to $570 million.
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