Twitter slips 9% as analysts note solid quarter but fret U.S. slowdown

Oct. 27, 2021 12:30 PM ETTwitter, Inc. (TWTR)By: Jason Aycock, SA News Editor8 Comments

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  • Twitter (TWTR -9.3%) stock, higher in premarket after yesterday evening's Q3 earnings, turned sharply lower this morning as analyst reaction noted the U.S. market for the company may be losing steam.
  • Overall user growth was in line with expectations, reaching 211 million average monetizable daily active users, reflecting 13% growth. But international growth made up for a letdown at home: U.S. average mDAUs were 37 million vs. consensus expectations for 37.7 million.
  • The company showed resilience against Apple iOS privacy changes and supply-chain constraints, Mizuho says. There was strength returning from the Tokyo Olympics and a normalized live events schedule; ad engagements rose 6% and cost per engagement rose 33% amid increased demand in direct-response advertising.
  • But the U.S. growth was "lagging," James Lee and team say, and "We continue to believe user growth to be a key debate going forward. New products should be an important driver in user acquisitions and retention."
  • And despite the limited iOS impact, "we believe as (direct response) becomes a bigger part of ad revenues, TWTR would need to develop workaround solutions due to the variability of iOS reporting." It's Neutral on the stock.
  • Revenue growth of 37% was impressive, but the flatness in U.S. users may raise concerns about U.S. market saturation, Jefferies agrees. It also has a Hold rating.
  • Morgan Stanley is in tune: “Solid quarter, same debate,” it says, noting the key will be whether Twitter can build out a scaled ad business in the next few years. It's Equal Weight on the stock.
  • A more positive J.P. Morgan (Overweight) says Twitter should be relatively insulated from the supply-chain issues plaguing the broader market, with more than half its ad revenue coming from services and digital goods.
  • On the company's earnings call last night, it took on the question of the day (Apple's iOS changes had a "modest" impact on ads, CFO Ned Segal said) and highlighted the importance of the Olympics and other big events to its rebound.

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