Improving Ad Market Still Doesn’t Make Twitter a Buy, Says 5-Star Analyst
Big Tech earnings will grab the headlines on Thursday, when Facebook, Google, Apple, and Amazon will all announce quarterly results. Twitter (TWTR) reports on the same day and while hardly a minnow itself, will attempt to steer attention away from its larger peers.
Ahead of the print, we've used SEMrush data to provide some insights into the online performance of the social media giant. SEMrush, which is the world’s most accurate website traffic monitoring tool, shows that Twitter had 13.2 million visits in Q3, about 6% below Q2’s 14 million visits.
According to data from Standard Media Index (SMI), advertising spend improved in Q3, turning from -14% year-over-year in July, to +6% in August and +3% in September. Stifel analyst John Egbert points out that “the latter two were the first months to record positive growth y/y since March.”
The 5-star analyst expects improving economic conditions to play their part in Twitter’s Q3 report, although possibly not to the same extent as on its social media rivals.
“We expect Twitter's ad revenue declines will slow in 3Q amid a significant recovery in the digital advertising market, although we view Twitter's revenue base (largely skewed toward brands and large advertisers) as benefiting to a lesser degree than Facebook or Snap,” Egbert noted.
As a result, Egbert increased Q3 revenue estimates from $701 million to $781mm, reflecting a 5% year-over-year decline. The figure is slightly higher than the consensus estimates of $775 million.
Twitter might have had less traffic than in the previous quarter, but Egbert expects DAU (daily active users) additions to “remain strong in 3Q as Twitter likely benefited from elevated conversation around social issues, the global pandemic, and ongoing elections.” Egbert expects DAUs to be up by 14 million quarter-over-quarter.
Some issues, however, still concern Egbert when considering Twitter as a viable investment.
“We believe Twitter needs to invest heavily in the security of its platform (following several breaches / privacy lapses) and develop more robust tools / technology for advertisers,” Egbert concluded.
To this end, Egbert remains on the sidelines, suggesting a Hold rating and a $39 price target. This figure implies shares will drop by 24% over the coming months. (To watch Egbert’s track record, click here)
The majority of Street analysts also consider Twitter a Hold – 16, as it happens. With the addition of 3 Buys, the stock has a Hold consensus rating. At $46.23, the average price target suggests downside of nearly 5% from current levels. (See Twitter stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
