What Wall Street Thinks Of Twitter's Disappointing Quarter

Analysts were left with many questions after Twitter Inc TWTR reported first quarter earnings. Future concerns exist, leading to several price target cuts.

The Twitter Analysts: Raymond James analyst Aaron Kessler reiterates a Market Perform rating and has no price target.

Rosenblatt analyst Mark Zgutowicz has a Neutral rating and lowers the price target from $65 to $60.

KeyBanc analyst Justin Patterson has an Overweight rating and lowers the price target from $90 to $77.

Morgan Stanley analyst Brian Nowak has an Equal-Weight rating and lowers the price target from $68 to $62.

Bank of America analyst Justin Post has a Buy rating and lowers the price target from $92 to $82.

Earnings Takeaways: Twitter reported year-over-year revenue growth of 28% to $1.04 billion in the first quarter. The growth came in lower than peers, one analyst noted.

“Twitter’s US revenue performance was sub par to social peers including Snap, Pinterest and Factset, all of which witnessed 1Q US revenue momentum,” Rosenblatt's Zgutowicz said.

“Trends exiting the quarter in March were more solid,” Raymond James' Kessler said.

The first-quarter report led to several price target cuts and also some revised financial estimates.

“We acknowledge we were too aggressive on the initial revenue trajectory and lower 2021est/2022est revenue by 5%/4% respectively,” KeyBanc's Patterson said.

Patterson highlighted Twitter seeing strong advertising spend from sports betting and cryptocurrency companies and the growth of Twitter Topics.

“We view Topics’ expansion into international Topics and deepening coverage in popular categories, as providing vectors around engagement and ad growth,” he added.

Related Link: Twitter Nosedives On Q2 Guidance, Slower US DAU Growth

Challenges Ahead: One of the most talked-about items in the first-quarter report from both Twitter and analysts has been the company’s future with new Apple Inc AAPL policies.

“Of Twitter’s 38M US DAU count, we expect around 10 million to 15 million opting out of ads tracking on iOS, further burdening the company’s much-needed DR revenue diversification,” Zgutowicz said.

With many advertisers targeting customers, Zgutowicz sees Twitter facing risks ahead.

“We estimate at the low-end, nearly 25% of Twitter’s 38M mDAUS will no longer be targetable for 1-to-1 marketing.”

“The company’s revenue guidance incorporates conservatism around the pace of Brand spend,” Kessler said.

Twitter has existing execution challenges ahead making the stock a show-me story for Morgan Stanley's Nowak.

“Execution on performance marketing still the key,” Nowak said.

Bank of America's Post calls the second-quarter guidance from Twitter confusion with a range lower than the street estimate.

“While confusing guidance will be a warranted overhang, Twitter has had some notable volatility in results vs. guidance in prior quarters,” Post said.

Upside Ahead: Post said Twitter could surprise going forward and weakness in shares could offer an entry point for investors with a strong second half coming and trading at a significant discount on a price to sales basis against mid-cap peers.

“With product updates rolling out over the course of 2021, we believe there are catalysts ahead,” Patterson said.

TWTR Price Action: Shares of Twitter are down 15.16% to $55.22 at market close Friday.

(Photo by Brett Jordan on Unsplash)