By Kate George
In the thick of earnings season, there is never a dull moment for tech investors. This week, analysts weigh in ahead of earnings from Twitter Inc. (NYSE:), and reflect on the recently released figures by Stratasys, Ltd. (NASDAQ:).
Twitter Inc.
Twitter will report its Q315 results tomorrow after market close. Based on the pre-release and some intra-quarter data points, from RBC Capital Markets weighed in on the stock with a Sector Perform rating and a $41 price target.
Mahaney expects Twitter to report revenues of $559 million, which is in-line with consensus estimates and Twitter’s range of $545 million to $560 million. The analyst anticipates EPS of $0.01, below consensus estimates of $0.05.
Referring to ComScore trends, Mahaney said, “Multi-Platform U.S. UVs (unique visitors) increased 4% Y/Y in Q3, improving 13-pts from Q2. Total Minutes per UV deteriorated to a 20% Y/Y vs. Q2’s 13% Y/Y deterioration.” Mahaney also talks about Twitter’s workforce reduction (336 employees) in his report, and touches on Twitter “Moments;” a new feature on the platform that allows users to see content on specific local and global events.
The analyst will be looking at several metrics in Twitter’s upcoming report. First, he notes that user growth and engagement is expected to increase 13% year-over-year to 323 MAUs. Next, he points to advertising revenue trends in revenue growth, expecting that revenue will continue to decelerate. Lastly, Mahaney will be focusing on the monetization gap on the platform as Twitter’s MAUs are
In terms of things to look out for in Q3 earnings announcement, Mahaney lists the following: User growth and engagement with global user base expected to grow at 13% YoY to 323 Monthly Active Users (MAUs); trends in revenue growth, specifically advertising revenue with continued deceleration expected; and monetization gap as Twitter’s MAUs are monetized at much lower rate than Facebook, but is working on closing this gap. This last factor is one investment risk, along with other risks such as competition, uncertainly of new streams of revenue, unproven management team, and lower monetization of international users.
Based on statistics, Mahaney has a 64% success rate recommending stocks with a +20.7% average return per rating. Out of 32 analysts who have recently rated Twitter’s stock, 17 have rated it as Buy, 13 have rated it as Hold, and 2 have rated it as Sell. The average consensus price target for Twitter’s stock is $40.56, an upside of 33.88% over current levels.
Stratasys, Ltd.
This past Thursday, Stratasys reported preliminary results for its third quarter that failed to meet analysts’ expectations. The company posted revenue obetween $166 million and $168 million, well below estimates of $185 million and the company’s earlier guidance of between $175 million and $190 million. Furthermore, adjusted loss per share of $0.03 to EPS of $0.02 compare against consensus of $0.08 and previous guidance of EPS of between $0.02 and $0.13. Following the release, from William Blair weighed in on the company with a Market Perform rating, though the analyst did not provide a price target. Based on the numbers shared in the preliminary results, Drab expects the third quarter to see a revenue decline of 18%.
In his report, Drab says that the company has cited the difficult macroeconomic environment as one of the reasons for the shortfall in revenues and earnings. The difficult economy has resulted in customers cutting down on investments in capital equipment. Another reason for the drop is the excess capacity in the industry after extraordinary growth seen in 2013 and 2014. Drab says, “Management will continue to adjust the cost structure of the business and move forward with longer-term initiatives expected to position the company for future growth.”
Following the negative announcement, Drab has updated his forecast for the company. He forecasts revenue of $696 million, a drop of 7%, and adjusted EPS of $0.25, a drop of 88%, in 2015.
Brian Drab has a success rate of 59% with an average return per recommendation of 12.1%. Based on statistics, out of 11 analysts who have recently rated the stock of Stratasys, 6 have rated it as Buy, 4 have rated it as Hold, and 1 has rated it as Sell. The average consensus price target for the stock is $32.67, an upside of around 18% over current levels.
