By Jordan Faigen
Twitter (TWTR) is finally experiencing a faster growth rate of new users, but is it too-little-too-late?
The Latest Twitter News
Investors have been waiting for Twitter to increase the rate in which new users join the micro-blogging website and, finally, the company is seeing an increase. However, despite meeting the expectations of some analysts, Twitter’s Q1 results failed to impress the Street. Twitter did report a 119% increase in year-over-year revenue, generating $250 million in the first quarter. Yet, total timeline views, which measures engagement on the site, and the average number of timeline views per monthly active user, went down compared to last year. Twitter looks primed to increase profits this year, but growth in engagement and new users is not as likely.
What Do The Analysts Have To Say About Twitter
Analyst John Blackledge of Cowen & Co. reiterated his SELL Twitter rating with a $32 price target. John expects, “continued decelerating user growth (+22% y/y – 9th qtr in a row of user growth deceleration) and modest engagement growth declines (632 TLV/MAU, down 5% y/y and up slightly q/q).” John does, “expect accelerating monetization (WW ARPU of $0.86, +74% y/y up from +70% y/y in 4Q13) as TWTR ramps ad revenue in the US and Int’l.” But, “given the difficult environment for high multiple internet companies and despite rising monetization, we would expect further share downside.” John is ranked 2884 out of 3038 analysts, with a -4.1% average return over S&P-500 and a 35% success rate of recommendations.
On the other hand, MKM Partners analyst Rob Sanderson recommends BUY Twitter with a $72 price target. Rob made this recommendation before the Q1 results were released arguing, “TWTR has the most potential for significant upside surprise, though this is more speculative given limited history with only one quarter on record as a public company.” Rob also pointed out, “inputs from advertisers suggest meaningful performance gains and incremental dollars heading to TWTR with significant headroom, especially as new ad formats ramp.” But, he doesn’t expect user growth to drastically increase any time soon. Rob is ranked 227 out of 3038 analysts with a +5.2% average return over S&P-500.
Rob earned one of his highest returns recommending BUY Twitter in November of last year. When Rob initiated coverage on Twitter, he advised BUY with a $50 price target. Rob stated Twitter was “the most powerful media property today,” and believed Twitter had, “tremendous potential as an advertising medium.” This recommendation earned Rob +33.2% over S&P-500.
Conclusion
Twitter may not be bringing in new users fast enough, but are investors satisfied with the company’s potential monetary growth? Interested parties will have to wait and see if users, or money, grow the stock.
Jordan Faigen covers financial investments and the latest stock market news. She can be reached at Jordan@tipranks.com
