Twitter Stock Sinks After Q3 Earnings: 5 Analysts React To Impact Of iOS Privacy Changes

Twitter Inc TWTR shares tumbled 9.6% on Wednesday after the company disappointed the market with lackluster sales guidance.

On Thursday, Twitter reported third-quarter adjusted EPS of 18 cents, beating consensus analyst estimates of 15 cents. Revenue of $1.284 billion fell just short of analyst expectations of $1.285 billion. Revenue was up 37% from a year ago.

Related Link: Facebook Analysts Break Down Q3 Earnings: 'Big Investments For A Big Vision'

Twitter reported 211 million monetizable daily active users, slightly below the 211.9 million Wall Street was expecting. Ad revenue in the quarter was up 41% to $1.14 billion, while total ad engagements were up 6% from a year ago.

Twitter also reported a $766-million, one-time legal charge related to a September settlement involving Twitter allegedly misleading investors about user growth.

Looking ahead, Twitter guided for fourth-quarter revenue of between $1.5 billion and $1.6 billion. The midpoint of that guidance range fell short of consensus analyst estimates of $1.58 billion.

Twitter Analyst Sees Reassuring Growth: Bank of America analyst Justin Post said Twitter’s revenue growth was reassuring in a difficult environment.

“Overall, a solid quarter given peer misses, with an optimistic tone on [direct response] ad traction,” Post wrote.

CFRA analyst Angelo Zino said he is bullish on Twitter’s push to explore shopping on the platform.

“We think results are impressive relative to peers, as TWTR appears to be better navigating iOS privacy changes as well as supply chain concerns given its greater exposure to services/digital goods,” Zino wrote.

KeyBanc analyst Justin Patterson said Twitter bulls will likely argue its brand value is solid, and it has an opportunity to gain direct response budget share.

“While we agree with that view, we also acknowledge mDAU growth remains subdued (particularly in the U.S.) and reaching 315M by 4Q23 appears less likely,” Patterson wrote.

Twitter's Lackluster Outlook: Rosenblatt Securities analyst Mark Zgutowicz said Twitters stagnant user base has left it at a significant scale disadvantage versus peers.

“Further, the permanently reduced (iOS) [Return On Advertising Spend] on all DR platforms means Twitter's targeted 50% DR revenue mix needs to come from substantially higher ad volume share, as pricing will naturally following eroding ROAS,” Zgutowicz wrote.
Raymond James analyst Aaron Kessler said 2022 operating expense growth guidance was higher than expected.

“We believe shares are fairly valued at ~8x 2022E revenues given our outlook for mid-to-high teens long-term revenue growth,” Kessler wrote.

TWTR Price Action: Twitter shares were down 10.11% at $55.22 late in Wednesday's session.

Twitter Ratings, Price Targets:

• CFRA has a Buy rating and cut the price target from $85 to $75.
• Bank of America has a Buy rating and reduced the price target from $82 to $79. 
• KeyBanc has an Overweight rating and lowered the price target from $81 to $70.
• Rosenblatt Securities has a Neutral rating and $65 target.
• Raymond James has a Market Perform rating.