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Goldman Sachs Still Sees 'Significant' Value In Twitter

While Twitter Inc TWTR reported its 2Q revenue and 3Q guidance below consensus, engagement seems to be improving, Goldman Sachs’ Heath P. Terry said in a report. He maintained a Buy rating on the company, while raising the price target from $22 to $21.

Twitter reported its 2Q revenue at $602mn, representing 20 percent y/y growth, but missing consensus expectations of $608mn. The company’s revenue growth was driven by 3 percent y/y MAU growth and 15 percent y/y growth in monetization. Adjusted EBITDA came in at $174.6mn, handsomely beating consensus expectations of $154.2mn.

Twitter’s 3Q guidance came in below consensus due to slowing growth in advertisers and lower CPEs.

Engagement Is Key

MAUs rose to 313mn, driven by positive net adds in the US as well as international, analyst Heath Terry mentioned. Engagement improved in 2Q, as is visible in the double-digit y/y increase in active minutes, tweet impressions, searches, and DMs. The improvement was driven by product innovation and several product improvements released during the quarter.

“We continue to see significant value in Twitter’s user base, content, and interaction data despite the company’s difficulty in realizing that value,” Terry commented. He noted that Twitter’s stock was trading at a lower multiple than the sector average, despite the company’s “faster growth, multiple avenues for new revenue, and potential M&A optionality.”

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DateFirmActionFromTo
Jul 2016Morgan StanleyMaintainsUnderweight
Jul 2016Goldman SachsMaintainsBuy
Jul 2016CitigroupMaintainsNeutral

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