Wall Street Reacts To Twitter's Mixed Quarter: Positioning For 2021?

Twitter Inc TWTR shares were down 5% on Friday after the company reported an earning beat in the first quarter but failed to reassure investors that its advertising business has stabilized in the current quarter.

Twitter reported first-quarter earnings per share of 11 cents on $808 million in revenue. Both numbers beat consensus analyst estimates of 10 cents and $776 million, respectively. Twitter’s 166 million in monetizable daily active users also came in ahead of analyst estimates of 164 million.

Several analysts have weighed in on Twitter since the report.

Limited Visibility

Wedbush analyst Michael Pachter said the limited visibility and dropped guidance overshadowed the strong first quarter.

“Management forewent providing detailed revenue or operating income guidance for Q2, and did not update its previously withdrawn guidance for FY:20 operating expenses, headcount growth, capital expenditures, or stock-based compensation,” Pachter wrote in a note.

Stifel analyst John Egbert said it’s a bad sign that Twitter’s ad business appears to be underperforming its largest online advertising peers.

“Twitter has positioned its upcoming MAP update as a magic bullet to cure its challenges in courting direct response advertisers, but we worry it could take more than a product update to return Twitter to sustainable growth anytime soon,” Egbert wrote.

Rosenblatt Securities analyst Mark Zgutowicz said Twitter’s user base and engagement carry meaningful value, but it’s clear the company has plenty of near-term challenges.

“While there now may be certainty in accelerating investment in DR products, the timeline and ability to successfully monetize is much less certain, in our view,” Zgutowicz wrote.

Positioning For 2021

MKM Partners analyst Rohit Kulkarni said Twitter could be shaping up to be a great story, but not in 2020.

“As live events return (hopefully) in 2021, Twitter could benefit from a couple of products that could provide a boost to its monetization, particularly with direct response advertisers in International markets,” Kulkarni wrote.

Instinet analyst Mark Kelley said Twitter appears to be making the correct strategic decisions, but near-term uncertainty limits upside.

“The main revenue priorities appear to be on track, with the ad server rebuild expected to wrap up by the end of 2Q (also noted that some services were handled by the new ad server during the Super Bowl) and the next iteration of MAP now in beta,” Kelley wrote.

Bank of America analyst Justin Post said Twitter is positioning its business for a 2021 rebound.

“We are encouraged by user engagement growth, which we expect to translate to robust revenue growth in 2021 driven by updated ad products and the return of sports and other events,” Post wrote.

Twitter Ratings And Price Targets

• Wedbush has a Neutral rating and $30 target.
• Stifel has a Hold rating and $26 target.
• Rosenblatt Securities has a Neutral rating and $27 target.
• MKM Partners has a Neutral rating and $29 target.
• Instinet has a Neutral rating and $35 target.
• Bank of America has a Buy rating and $35 target.

Twitter's stock traded around $27.43 at time of publication.

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