Twitter (TWTR) - Get Twitter, Inc. Report shares edged lower on Monday after analysts at Bank of America cut their price target on the microblogging site to $82 a share from $90 ahead of its third-quarter-earnings report.
Analyst Justin Post reiterated a buy rating on Twitter and said the stock could outperform its peers because of the company's strong exposure to ad revenue from brands.
"Our $82 price objective is based on 11 times the expected enterprise value/revenue multiple for 2022," Post wrote in a note to investors. His previous estimated multiple was 12 times.
"Our revenue multiple is at a discount to peers given" Twitter's potential for product improvement, potential upside for revenue in second-half 2021, and the potential for positive sentiment amid a heavy event calendar, he said.
"[We] maintain positive view on new-product introductions and higher exposure to" a recovery in brand-advertising spending, Post added.
"We reiterate our buy rating as Twitter has over 80% revenue exposure to brand revenues, revenue growth in second quarter showed early signs of the brand-spend recovery we anticipated, and we think the second-half brand-advertising strength is possible as events return," he said.
And while growth in daily average users has slowed this year, "Twitter has delivered strong two-year growth for US daily average users vs. public peers," Post said.
Shares of the San Francisco company at last check slipped 0.9% to $61.71.
Twitter reports third-quarter earnings on Tuesday after the closing bell. Analysts surveyed by FactSet estimate the company earned an adjusted 17 cents a share on revenue of $1.28 billion.
Post estimates revenue at $1.29 billion, a touch above consensus. His estimate indicates a 38% rise from a year earlier.
For the second quarter the company swung to profit of $65.7 million, or 8 cents a share, from a loss of $1.38 billion, or $1.75 a share, in the year-earlier quarter. Twitter clocked $1.19 billion in revenue, up 74% from $683.4 million.
Last week, Snap (SNAP) - Get Snap, Inc. Class A Report shares tumbled after Snapchat's parent said its ad business had been hampered by changes in Apple’s ad-tracking rules. That report led to a wider selloff in tech stocks, including Facebook (FB) - Get Facebook, Inc. Class A Report and Twitter.
A few weeks back Twitter said it was selling mobile-ad firm MoPub to AppLovin for $1.05 billion cash.
“The sale of MoPub positions us to concentrate more of our efforts on the massive potential for ads on our website and in our apps,” Ned Segal, Twitter’s chief financial officer, said in a statement.