Twitter Analysts React To Earnings Beat: 'Ad Ramp Is Just Getting Started'

Twitter Inc TWTR shares soared 11.5% on Wednesday after the company reported big fourth-quarter earnings and revenue beats.

Twitter reported adjusted EPS of 38 cents on revenue of $1.29 billion. Both numbers beat consensus analyst forecasts of 31 cents and $1.19 billion, respectively. Revenue was up 28% from a year ago.

Twitter reported 192 million monetizable daily active users, missing analyst expectations of 193.5 million.

Looking ahead, Twitter guided for first-quarter revenue of between $940 million and $1.04 billion. The company also said it plans to increase its number of employees by more than 20% in 2021, which will contribute to a 25% increase in expenses.

On the earnings call, CEO Jack Dorsey addressed the platform banning former U.S. President Donald Trump, saying Twitter is “bigger than any one account.”

Product Launches Create Opportunity: KeyBanc analyst Justin Patterson said Twitter’s ad ramp is “just getting started.”

“With product catalysts in the near and medium term, we have more conviction in >20% annual revenue growth,” Patterson wrote in a note.

Morgan Stanley analyst Brian Nowak said Twitter’s new MAP 2.0 and other products will be key to the Twitter growth story.

“These are the types of micro-level improvements that are important to driving durable outsized growth…and advertiser/agency incremental adoption of this product is likely to be important to determining how fast revenue can really grow throughout ‘21,” Nowak wrote.

Bank of America analyst Justin Post said the MAP rollout provides significant potential upside for 2021 growth numbers.

“While the full impact of MAP launch and iOS 14 changes are still unknown, we continue to see expansion of Twitter’s limited DR ad spend as a material growth driver for the next three years, while Twitter should have a more limited ‘21 iOS revenue impact vs peers,” Post wrote.

See Also: $1,000, 5 Years Later: Twitter Takes Off

iOS Changes A Concern: Raymond James analyst Aaron Kessler said Twitter demonstrated impressive advertising strength in the fourth quarter, but the negative impact of changes to Apple, Inc. AAPL privacy policies is still a major unknown.

“The company continues to monitor the evolving identity landscape, and noted that potential IDFA impacts are still difficult to size at this point,” Kessler wrote.

Rosenblatt Securities analyst Mark Zgutowicz said Twitter’s soft 2021 guidance highlights the uncertainty surrounding Apple’s iOS changes.

“While delivering strong 4Q revenue both in and outside the US, we have limited confidence in the company's 25%+ soft '21 revenue guide given expected high iOS/IDFA non-consent Rates,” Zgutowicz wrote.

TWTR Ratings And Price Targets:

• Raymond James has a Market Perform rating.
• Morgan Stanley has an Equal-Weight rating and $54 target.
• Rosenblatt has a Neutral rating and $55 target.
• KeyBanc has an Overweight rating and $80 target.
• Bank of America has a Buy rating and $78 target.

Twitter's stock trades around $65.45 at publication time.