Goldman Sachs Keeps Buy Rating On Twitter, Sets $22 Price Target

Shares of Twitter Inc (NYSE: TWTR) plunged about 15 percent in Wednesday's pre-market after the micro-blogging site reported mixed results for its first quarter and guided second-quarter revenue below consensus. However, Goldman Sachs is keeping its Buy rating on the stock, and even increased its price target by $1 to $22.

Despite managing to beat estimates on the earnings front ($0.15 vs. $0.10 est), Twitter reported its first quarter revenue at $595 million, short of the consensus estimates of $608 million. Revenue weakness was on account of lower ad revenues, which came in at $531 million, below the consensus expectation of $540 million.

"We continue to believe that there is significant value in Twitter's user base, content, and interaction data that a stable management team and focus on product should be able to unlock," analyst Heath Terry wrote in a note to clients.

Related Link: Here's What Twitter Metrics You Should Be Watching For Today

On a positive note, Twitter added 5 million monthly active users (MAUs) in the quarter, bringing its quarterly MAU's to 310 million, narrowly beating expectations. But, the catch is all 5 million additions came from international markets, while the United States was flat at 65 million MAUs.

Guidance

The company guided second quarter revenue of $590 million–$610 million, significantly below the consensus expectation of $678 million.

"While we believe the company can improve the user experience around content curation, timeline structure, conversation threading, and search, management's commentary illustrates the degree of difficulty involved in driving user growth and engagement," Terry noted.

The analyst cut his 2016 adjusted EPS view by 5.7 percent to $0.58, revenue outlook by 5.5 percent to $2.773 billion and adjusted EBITDA forecast by 3.5 percent to $735.6 million.

Shares of Twitter closed Tuesday's trading at $17.75. In the pre-market hours, the stock fell about 15 percent to $15.05.