Twitter's Q4 Strong, But Company Needs Meaningful Revenue Growth: Analysts React To Earnings

Social media platform Twitter Inc TWTR reported fourth-quarter financial results Thursday. Analysts reacted with their takes on what the company's advertising and user numbers could mean for the future. 

The Twitter Analysts: Morgan Stanley analyst Brian Nowak has an Equal-Weight rating and raised the price target from $57 to $59.

KeyBanc analyst Justin Patterson has an Overweight rating on Twitter and a $40 price target.

Raymond James analyst Aaron Kessler has a Market Perform rating on Twitter and no price target. 

Related Link: See Why Twitter Stock Shines: Key Takeaways From Q4 Results

The Analyst Takeaways: Twitter saw a mix of brand and direct response revenue of 85% and 15%, respectively, in the fourth quarter. Nowak said this showed strength in online advertising but shows uncertainty for the future.

“TWTR is highly focused on e-commerce ad units next within its DR offerings, so this will be important to monitor,” Nowak said.

Twitter is also investing in its platform, which could help with growth, Nowak highlighted.

Another area that stood out in the fourth quarter earnings report for Nowak was the company announcing additional share buybacks. This makes the company more shareholder friendly such as other big technology companies, Nowak said.

Twitter could need to recalibrate estimates for the future, Patterson warns.

“While we are encouraged by product improvements, this has yet to translate toward more meaningful revenue growth,” Patterson said.

The analyst also highlighted the company’s share buyback program as a positive.

Negatives for Patterson in the earnings report were a miss on mobile daily active user estimates and performance advertising remaining unchanged.

Kessler highlighted ad engagement declining in the fourth quarter, but cost per engagement rising as providing a neutral take on the company.

“Ad mix shifted toward lower funnel ad formats have a higher volume thresholds for ad engagement,” Kessler said. “These ad formats have higher cost per engagement leading to a 39% increase in cost per engagement.”

Kessler sees Twitter shares fairly valued at current levels.

TWTR Price Action: Twitter shares are trading down 0.67% at $36.78 Friday afternoon at publication.