Twitter (TWTR) Reports Mixed Q3 Results, Shares Higher on Limited iOS Impact; Analysts Mostly Neutral

October 27, 2021 5:57 AM EDT
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Shares of Twitter (NYSE: TWTR) are up over 2% in pre-open Wednesday after the company said the iOS impact was better than-feared.

The company reported an EPS loss of $0.54 to miss on the analyst estimates of $0.17. Revenue for the quarter came in at $1.28 billion, which is in line with the consensus.

Twitter reported average monetizable daily active usage (mDAU) at 211 million, which compares to 187 million a year-ago and 206 million in the previous quarter.

"I am proud of our third quarter results. We're improving personalization, facilitating conversation, delivering relevant news, and finding new ways to help people get paid on Twitter. Average monetizable DAU (mDAU) reached 211 million, up 13% year over year in Q3, accelerating from 11% year over year growth in Q2, driven by ongoing product improvements and global conversation around current events,” said Jack Dorsey, Twitter's CEO.

As far as the guidance is concerned, Twitter projects Q4 2021 sales of between $1.5 billion and $1.6 billion, with the midpoint coming in lower than the consensus of $1.58 billion.

Raymond James analyst Aaron Kessler reiterated a Market Perform rating on Twitter after “solid 3Q results.”

“In contrast to other social media platforms, Twitter noted a relatively modest impact from Apple’s App Tracking Transparency (ATT) changes in iOS 14.5. Twitter called out particular strength in brand advertising and the U.S. as well as direct response. The company continues to see a path to $7.5B in revenue in 2023 despite ATT headwinds and the sale of MoPub (and an associated $200-250M in revenue in 2022) with several contributors including scaling DR and commerce elements. Negatively, Twitter guided to 2022 expense growth of at least mid-20s (vs. our prior 15% estimate). We maintain our Market Perform rating as we believe shares are fairly valued at ~8x 2022E revenues given our outlook for mid-to-high teens long-term revenue growth,” Kessler wrote in a client note.

Similarly, Rosenblatt analyst Mark Zgutowicz maintained a Neutral rating and a $65.00 per share price target. When it comes to the iOS impact, the analyst said:

“Perhaps the irony in the dark iOS cloud over the DR (direct response) ad industry is the pocket of sunshine over Twitter. The broad cohort vs. one-to-one targeting restrictions now in iOS --executed by Apple's SKAdnetwork-- leaves Twitter on a more level playing field with peers like Facebook and Snap. These and other DR peers have historically had much stronger first party data signals and subsequently one-to-one targeted returns vs. Twitter. With that said, Twitter's near term bright spot likely dims over NTM as its DR walled garden peers invest multi-billions building new targeting models adjacent iOS. Further, the permanently reduced (iOS) ROAS on all DR platforms means Twitter's targeted 50% DR revenue mix needs to come from substantially higher ad volume share, as pricing will naturally following eroding ROAS,” Zgutowicz said in a note sent to clients.

The analyst says TWTR’s 37 million US daily active users (DAUs), a number that is basically flat over the recent 12 months, “continues to leave it at a significantly scale disadvantage vs. peers.”

Shares of Twitter closed at $61.43 yesterday.

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