Twitter (NYSE: TWTR) is a San Francisco, California based online social networking service that allows users to send, as well as read 140-character messages called ‘tweets.’ Twitter released its third quarter report on Monday, October 27th after the closing bell with rather mediocre results. Although the social media website’s revenue and profit met analysts’ expectations, its revenue forecast estimates and numbers revealed a slowdown in new users. Consequently, Twitter dropped 12% in premarket trading on Tuesday morning.
In Its Q3 results, Twitter reported $0.01 earnings per share on a Non-GAAP basis, staying in line with analysts’ expectations. During the same quarter of last year, Twitter posted -$0.13 earnings per share. The company had revenue of $361.00 million for the quarter, compared to the consensus estimate of $350.24 million. Twitter’s quarterly revenue was up 114% on a year-over-year basis. Analysts expect that Twitter will post $0.10 EPS for the current fiscal year.
Many speculate Twitter’s less than impressive report stems from investors’ expectations for the website to reach the same amount of users as Facebook. It does not help that Twitter CEO Dick Costelo is the one setting these expectations. He said in the report, “I’m confident in our ability to build the largest daily audience in the world, over time, by strengthening the core, reducing barriers to consumption and building new apps and services.” Although Costelo does not directly compare Twitter’s goals with that of Facebook, it only makes sense that investors will compare both social media websites and its ad businesses and user bases.
Shares of Twitter opened at $42.24 on Tuesday, October 27th. The social media service has a 1-year high of $74.73 and a 1-year low of $29.51. The stock’s daily moving average is $42.57 and it has a 50-day moving average of $51.26. The market cap for Twitter is $26.16and its P/E ratio is not applicable.
On October 28th, Bank of America Analyst Justin Post downgraded his rating for Twitter from Buy to Hold and lowered his price target from $60 to $50. His thesis on Twitter was based on “1) revenue upside from new ad formats, 2) improving MAU trends from product changes, and 3) opportunity to convert or monetize non-logged in users.” He went on to say, “Call commentary suggest that these opportunities still exist (11/12 analyst day will highlight opportunities), but 4Q guidance suggests the ramp will not be consistent and or as fast as we expected to drive stock higher near-term, and we have less confidence in the long-term MAU ramp.” Post currently has an overall success rate of 68% recommending stocks with a +24.1% average return per recommendation. He has rated Twitter 9 times, earning an 83% success rate recommending the stock.
Separately on October 28th, Pivotal Research analyst Brian Wieser upgraded his rating for Twitter from Sell to Hold, raising his price target from $38 to $42. He reasoned, “Valuing Twitter is subjective given the company’s early stage of development. A view on its fair value depends on long-term expectations and the appropriate metrics which drive potential. As the company has continually acted on a solid strategic view and capable execution of revenue generation, our confidence in Twitter’s long-term potential has been enhanced over the past year, with our price target rising from $30 to $38 since the IPO.” He continued, “On review of 3Q14 results and the roll-over of our price target to a year-end 2015 basis, we now value Twitter at $42 per share. This is within a 15% range of current levels (as indicated in the after-market following yesterday’s earnings) allowing us to once again rate Twitter Hold.” Wieser currently has an 85% success rate recommending stocks with a +25.9% average return per recommendation.
On average, the top analyst consensus for Twitter is HOLD.