Twitter Inc has failed to impress Wall Street with the release of its third quarter results and it appears that Jack Dorsey won’t be able to save the firm. The firm posted decent revenues but profit was a no show and user growth remains an issue. The worst part is that the firm did not give Wall Street much hope for the future as its Q4 guidance came in below estimates.
Analysts at have weighed in on where the firm is headed but it appears there’s no consensus on Twitter’s fate. It would be hard for analysts to agree on Twitter’s prospects because the firm has climbed from a $26 IPO price on Nov 2013 to a $73 trading price in Dec 2013 – it crashed to $30 in May 2014 before it climbed to $55 in Oct 2014. Now, Twitter dived from a $51 trading price in April 2015 to a $24 all-time low in Aug. 2015 and it now trades under $30 per share.
The bullish case for Twitter
Leading the bullish case for Twitter are the folks at Pacific Crest who have an “Overweight” rating on the stock. Evan Wilson of Pacific Crest notes that “our analysis of companies with new CEOs [shows] that 90 days after hiring shows a significant positive return.” He believes that the new CEO still has enough time to right the ship since he is only 17 days on the job. Folks at Jefferies are also bullish on the firm with a “Buy” rating.
Analysts at Goldman Sachs are bullish about the prospects of Twitter as they maintain their buy rating on the stock. They think that the firm would soon solve the problem it has with user growth. In the words of Goldman Sach’s Heath Terry “despite the slowdown in MAU growth and 4Q outlook below expectations, we continue to believe the pace of product innovation, including the recent launch of Moments, should improve ease of use and expand the audience.”
The cautious case for Twitter
Some analysts think that the pendulum of Twitter can swing either way as the new CEO tries out new changes at the firm. Analysts at Well Fargo have a “Market Perform” rating on the stock. Peter Stabler of Well Fargo notes that the firm is “stuck in neutral” and he thinks “a rich valuation, complexity of the Twitter platform and potential challenges to meeting high investor expectations.”
Analysts at Raymond James are also taking the cautious view on Twitter as they maintain a “Market Perform” rating on the stock. Aaron Kessler of Raymond James opines that he is “encouraged by efforts to improve Twitter for users and provide better measurement tools for advertisers”. However, he thinks the firm won’t see a change in its fortunes anytime soon because “the turnaround remains a multi-quarter effort”
The bearish case for Twitter
Despite all the efforts by CEO Jack Dorsey to get the stock back into good books of Wall Street, some analysts think that the stock would have a hard time escaping from the bear hug. Leading the bear charge against Twitter are the analysts at Morgan Stanley who have issued an “Underweight” rating on the stock. The analysts think that the weak fourth quarter forecasts suggests that Twitter is still far from making profits.
Analyst Brian Nowak of Morgan Stanley says “reinforces our concern that Twitter will be unable to gain enough share of ad budgets to deliver consensus expectations and support current valuation.”