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A Jefferies analyst has reflected on Twitter (NYSE:TWTR) after the social media company posted disappointing results last week.
The analyst took note of “just” 2% ad revenue growth while expenses continue to soar. The analyst has blamed the weakening ad market on Twitter’s soft results.
As a result, the analyst cut the FY23 revenue estimate by 12% and now sees “growth well below Feb ’21 Analyst Day target.”
“When TWTR initially set its guide of >$7.5B in rev by FY23 in Feb ’21, the macro backdrop was supportive of 20%+ growth. However, with the rapidly deteriorating digital ad market, we now expect $6B in FY23 rev with 5% growth in FY22 and 13% in FY23. Even the FY23 guide of 315M+ mDAUs looks overly optimistic considering it would require 20%+ growth for the next 2 years (vs. +12% in FY21),” the analyst wrote in a client note.
As far as the company’s legal battle with Elon Musk is concerned, the analyst sees potential for the deal still taking place at a lower price.
“Given there is significant cost to Musk delaying the close, we believe TWTR is incentivized to settle on a deal price below $54.20. Our legal expert believes that if Musk appeals the Court’s decision (likely coming in late ’22) that the case could take another 3-4 years to be fully resolved. In the event that the case is prolonged, TWTR’s valuation could be further eroded pressuring the company further to settle on a lower price,” the analyst added in a client note.
Twitter stock price closed at $39.84 on Friday.
