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Alex Cho

Twitter Price Target Cut to $13 at Nomura Securities

Nomura Securities analyst Anthony Diclemente slashed his price target to $13 in response to Twitter’s earnings announcement. His estimate was extremely similar to my recently revised financial model on TWTR shares.

He’s anticipating revenue of $2.359 billion for FY’17 and non-GAAP EPS of $0.40. Ironically, my initial response coming out of the report were risks to revenue models among consensus analysts. However, the financial estimates I have received following the earnings report suggest some new-found conservatism, as the remaining members of the consensus revised lower in response to weakening ad-metrics.

Here were the key highlights from DicClemente’s research note:

Twitter’s engagement trends are improving… The company disclosed that daily active user growth accelerated in each quarter of 2016, with YoY growth of 11% in the 4Q. …but not translating into revenue growth. Management highlighted that competitive pressures continue to intensify, challenging advertiser demand.

“Trump bump” not necessarily borne out in results. While the President’s use of Twitter is well publicized, management comments implied that one-time events such as the election have limited ability to affect longer-term trends, and that acceleration in audience metrics came as a function of machine learning in the timeline and marketing initiatives.

Lowering estimates, maintain target price and rating. We materially lower our forward revenue estimates. In light of accelerating audience trends, our view of Twitter’s strategic value remains intact. Our target price remains $13, based on 30x our non-GAAP 2018 EPS estimate of $0.42.

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