Results from social media giant Twitter Inc (NASDAQ:TWTR) were mixed but stable, according to Canaccord Genuity, which has downgraded the stock.
The new rating is now “hold”, down from “buy”, with the broker sheepishly admitting it is “late to downgrade the stock”, though it still thinks the downside is limited after the shares lost more than a tenth of their value in after-hours trading yesterday.
The turnaround story has changed over the last two quarters from ‘fix the product and revenue will follow’ to ‘build a live mobile business’.
The broker thinks the company has a decent chance of pulling off this new strategy, but that did not stop it from lowering its revenue estimates significantly for the next two years, though the earnings per share forecasts remain unchanged.
“Management clearly has gone all out over the last two quarters to aggregate video content and begin to sketch out a business case. We are impressed by this alacrity while also somewhat worried about the implications for what the team is likely seeing in the core use case and business. We believe there will be heavy lifting to expand content and go to market for video advertisers, and this is likely to take time,” the broker said, as it chopped its price target from US$20 to US$16.
“Twitter could still be an attractive acquisition, and we view this as significant upside risk, but for now we believe fundamentals will be sufficiently challenged to move to the sidelines,” Canaccord said.
Results from iPhone maker Apple Inc (NASDAQ:AAPL), released after the bell last night, gave the share price a mighty boost in screen-based trading after the close.
The results were roughly in line but showed surprising iPhone strength, according to Swiss bank UBS, with unit sales of 40mln, while the September quarter outlook was better than expected.
“There has been concern that the company was losing understanding and control of the iPhone cycle. Our sense is that [CEO Tim] Cook has a good handle on demand, which should give investors more confidence. For example, last quarter's comment predicting better iPad results proved correct,” UBS said, as it stuck with its “Buy” rating and US$115 price target.
The price target is around 13 times UBS’s earnings per share forecast for the next financial year, which is about on a par with other big-cap tech names.
Sportswear outfit Under Armour Inc (NYSE:UA) delivered a solid set of quarterly results yesterday but not enough to make Jefferies get off the fence.
The broker stuck with its ‘hold’ recommendation and price target of US$42 – some 64 cents above the current share price – saying “this Armour is strong, but valuation makes it too heavy for us”.
The Stephen Curry line of footwear “continues to soar”, the broker noted, while international revenue was the other bright spot, with China doing “exceptionally well”.
“As we see it, today confirms that UA is an early stage growth company and the power of the brand is only just being realised abroad. As the company continues to build that presence and forge ahead in footwear, we believe near- to medium- term margin compression will be overlooked so long as sales remain robust,” Jefferies said.