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Alex Cho

Twitter Price Target to $16 at SunTrust Robinson Humphrey

SunTrust analyst Rodney Hull revised his price target modestly lower to $16 after TWTR busted out on its past earnings conference call. The analyst revised his 2017 estimate on revenue and earnings lower to $2.449 billion and non-GAAP EPS to $0.29.

Currently the consensus estimates diverge on both revenues and earnings. Analysts believe revenue will be weak or EPS will perform above expectations.

I’m taking on the stance that TWTR’s earnings will ultimate surprise, but revenue will be below the consensus range for much of 2017 until revenue estimates are revised lower.

Here were the key highlights from the analyst note:

Twitter missed 4Q revenue expectations, with US ad revenue falling 7% YoY, and guided 1Q well below expectations, down 17% at the mid-point, and EBITDA margins of ~17% vs. 30% in FY’16. Importantly, the outlook for revenue growth deteriorated as the calendar moved from Jan to Feb amid increasing competition for advertising dollars. Further, while Twitter’s efforts to streamline sales and launch product innovations are appropriate, they will take time to positively contribute to growth. Therefore, visibility remains very limited regarding a return to growth. Maintain Hold, PT to $16 from $18.

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