Twitter’s recovery might not be over, but some analysts are reining in their expectations for the company.
From the second half of 2019 through 2021, Pivotal Research Group just reduced its revenue forecast for Twitter.
While maintaining its Buy rating, Pivotal is also cutting its target price for Twitter from $48 to $47. Among other reasons for its modest outlook, Pivotal cites a more challenging third-quarter this year for advertising comps relative to the same period in 2018.
The research firm had assumed 8% sequential growth, which is now looking too optimistic. As such, Pivotal just reduced third-quarter sequential domestic ad growth to 3%.
More broadly, Pivotal is worried that oversaturation of online marketing within overall ad budgets will present problems for platforms large and small.
There is also a risk that macro-economic deceleration will cause greater-than-expected declines in advertising, while user growth slows faster than analysts are expecting.
Pivotal also maintained its buy rating on Twitter and Amazon in May.
Mitch Kummetz, a senior research analyst at Pivotal, said in a client note that Twitter management “has cemented its position firmly as the No. 1 player behind [Facebook] in social. We like where they are in terms of product innovation and expect GAAP operating margins to improve into 2020 and beyond.”On the Amazon front, despite its relatively high stock price, Kummetz called it “a must-own name with huge upside even from here."
Separately, despite a slew of scandals and the looming threat of government regulation, Facebook remains the apple of investors’ eyes.
Maintaining its buy rating on Facebook, Pivotal believes its current revenue estimate is conservative. “2019 could be a peak investment year, and we see potential new legs to the story substantial enough that they can move the needle even at [Facebook’s] size,” Kummetz noted.