Following the latest results, Twitter’s 38 analysts are now forecasting revenues of US$3.99b in 2020. This would be a meaningful 15% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to nosedive 81% to US$0.36 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.95b and earnings per share (EPS) of US$0.47 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
Despite cutting their earnings forecasts, analysts have lifted their price target 8.7% to US$37.15, suggesting that these impacts are not expected to weigh on the stock’s value in the long term. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Twitter, with the most bullish analyst valuing it at US$50.00 and the most bearish at US$21.70 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Next year brings more of the same, according to analysts, with revenue forecast to grow 15%, in line with its 13% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 14% next year. So although Twitter is expected to maintain its revenue growth rate, it’s only growing at about the rate of the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Twitter going out to 2024, and you can see them free on our platform here..” data-reactid=”37″>With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Twitter going out to 2024, and you can see them free on our platform here..