Deutsche Bank Pounds the Table on Twitter (TWTR)
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Rating Summary:
10 Buy, 47 Hold, 5 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 20 | Down: 14 | New: 22
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Deutsche Bank analyst Ross Sandler was out pounding the table on Twitter, Inc. (NYSE: TWTR) Friday, reiterating a Buy rating and price target of $60 and saying it could be the best mean-reversion ideas for 2015.
Sandler commented, "Twitter remains one of the most controversial names in large cap consumer internet given the frothy multiple, its C-suite turmoil and negative sentiment. Despite laying out the kitchen sink at Analyst day in November, most investors either don’t believe management’s long term outlook ($11B+ rev) or don’t think the value is compelling enough today. Our view is unchanged, consumer internet stories that have: 1) improving core products, and 2) are heavily undermonetized, tend to work themselves toward much higher valuations, and the best time to add to positions is when they are most out of favor. Twitter could be one of the best mean-reversion ideas for 2015.
The analyst compared Twitter to Facebook in 2012/2013. "Similar to the 2012/13 bear raid on FB where the street was over obsessed with ‚declining engagement‛ only to see shares triple in a single quarter, we think the debate around Twitter’s MAU adds should eventually move to the background in favor of new product initiatives the company is working on. The big difference between the stories is that mobile ad revenue won’t be the TWTR catalyst. FB went from zero ad load to 5% in four-quarters owing to its over 1m paying advertisers at the time; Twitter’s demand constrained platform currently (as of 3Q) has less than 5% of the advertiser density, hence can’t see the same hockey-stick. The catalyst could be any of: 1) instant timeline (noncurated
Twitter-light), 2) international subs, 3) video, 4) logged out experiences, 5) messaging, 6) a partnership with Google, or non-disclosed product innovations. We don’t think we would be at a $25B EV if catalyst was obvious."
He said the stock is set up favorable for Q4 with low expectations around guidance and MAU. "The one quarter where TWTR shares worked on the print (2Q13) was a result of low MAU expectations, similar to today’s set up. We think the new CFO has
done a good job of calibrating street estimates and expectations for 4Q, and the skepticism following the analyst day bull case may imply anything but disappointment from TWTR in 4Q could be rewarded. We are expecting 5m MAU adds, $448m in revenue and $102M in EBITDA, in-line with consensus and guidance. We are also expecting core O&O MAUs to increase at a healthy clip from the 250m in 3Q by +15m, and see most of the MAU downward volatility in the 3-P line. O&O MAUs have actually grown nicely in 2014 despite the APAC bug issue."
For an analyst ratings summary and ratings history on Twitter, Inc. click here. For more ratings news on Twitter, Inc. click here.
Shares of Twitter, Inc. closed at $39.07 yesterday.
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