Analysts Cautious On Twitter, But See Value In Management's Vision

Twitter Inc (NYSE: TWTR) has had a tough week, spiking on Tuesday and Wednesday morning following a mixed bag of fourth-quarter results. The company beat Wall Street’s expectations for revenue, skidding to a $710 million finish against $709.9 million estimates. The company also exceeded earnings expectations with $0.16 EPS versus the analyst figure of $0.12.

Caution Across The Board

SunTrust Robinson Humphrey analyst Bob Peck was “cautiously optimistic” about the stock, writing that management had laid out a “cogent vision” for a turnaround with a “strategy and vision [that] should give investors hope.”

Related Link: The Twitter "Hope Trade" Is Dead

Peck sees the value of Twitter’s user base as a monetization asset, noting that a flat daily active user figure indicated a committed core audience. The time that audience spent using the network increased, indicating user engagement.

Even without an increase in user base, Peck wrote that the company could focus on cutting costs and increasing the revenue per user generated. “Twitter could thrive at a 25 percent lower headcount,” he wrote, and could reach 80 percent of Facebook’s average revenue per user in two years with the right monetization model.

Peck maintained a Buy rating, lowered his price target from $26 to $20 and raised his 2016 EPS estimate from $0.61 to $0.67.

Barclays analyst Paul Vogel thinks there’s “still a lot of work ahead” for Twitter despite a “better than feared” guidance. Vogel thinks Twitter’s new features, like Moments, are a step in the right direction, noting that he is “encouraged by the pace of innovation following leadership changes” in Twitter’s management.

Despite those moves, there are “still many issues” keeping Barclays “on the sidelines” on Twitter. Vogel maintained an Equal-Weight rating and lowered his price target from $33 to $19, but raised his EPS estimate from $0.60 to $0.68.

Related Link: Oppenheimer Expects Twitter Consensus To Fall 7-11%

Donald Trump: A Missed Opportunity

Morgan Stanley analyst Brian Nowak was also cautious on Twitter’s chances. Nowak was almost dumbfounded that Twitter was unable to capitalize on discussion-generating events like the rise of Donald Trump in the 2016 election, writing that those missed opportunities “speak to the challenges Twitter faces in growing its user base.” Trump himself is a consistent Twitter user.

Nowak offered a $0.55 EPS estimate for 2016.

Oppenheimer analyst Jason Helfstein was pessimistic on Twitter for the most part, offering a Perform rating, slightly lowering revenue projections from $3 billion to $2.9 billion and raising 2016 EPS estimates from $0.44 to $0.46.

In order to accomplish management’s vision, Helfstein wrote that CEO Jack Dorsey must focus on “the successful recruitment of leadership and engineers.” He also noted that monthly active user growth would have to accelerate before his firm could become positive.

Nomura, for its part, maintained a price target of $19.

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