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Twitter headquarters in San Francisco.
David Paul Morris/Bloomberg
Social media stocks
Snap
and
Twitter
have struggled in recent months following advertisement-tracking privacy changes to
Apple
devices. Analysts at Loop Capital just cut their targets on both.
Twitter
stock (ticker: TWTR) rose 3.2% on Tuesday to close at $44.36 while Snap stock (SNAP) rose 3.8% to close at $46.10. The S&P 500 index rose 1.8%. Twitter stock is down about 30% in the past six months, while Snap stock is down nearly 27%.
Loop Capital Markets analysts Rob Sanderson and Alan Gould cut their Twitter price target to $65 from $84 and their Snap target to $68 from $79 in notes on Monday.
Earlier this year,
Apple
(AAPL) implemented privacy changes to its mobile device operating system that now prompts users to opt in or out of being tracked by advertisers. Apps like Twitter and Snap’ Snapchat use such trackers to provide better insights on ads, so the identifier for advertisers, or IDFA, changes impacted results, especially for Snap.
“We think the community of app installation advertisers is highly savvy, understands the industry is going backward from the near real-time feedback loop provided by IDFA and will be open to” Snap’s own measurement solutions, the analysts wrote.
The analysts note that feedback from advertisers didn’t help investors predict the dip in results that came when Snap reported fiscal third-quarter results in October.
For Twitter, which derives much of its advertising revenue from brand spending, rather than actionable ads like online store product listings, the analysts think investors will be focused on user growth and the firm’s margin outlook.
The analysts forecast Snap’s 2023 revenue will hit $8.25 billion, while Twitter could hit $7.89 billion in fiscal-year 2023.
“We think that expectations are low, already reflecting a fairly significant miss though firming up 2022 margin outlook may be required before valuation improves,” they wrote, referring to Twitter.
They think Snap could find ways to monetize its new Spotlight feature, which is akin to TikTok.
The analysts believe the 2022 Winter Olympics could provide a solid boost for Twitter. They estimate the 2014 Sochi Olympics helped drive $10 million to $11 million in revenue. Twitter’s advertising business is much bigger than in 2014. Next year also brings with it the World Cup, which they estimate drove about $25 million for Twitter in 2014.
“We think diplomatic boycott will not have meaningful impact on the online audience for the games, though rumblings of NHL hockey stars abstaining due to COVID protocols could,” They wrote. “Assuming $40-50M contribution from Olympics would be a 4% to 5% boost to revenue growth in 1Q.”
Brand advertising at the start of 2021 was dampened by the Jan. 6 insurrection. That presents an easy comparison for ad platforms in 2022, especially for Twitter, according to the analysts.
Write to Connor Smith at connor.smith@barrons.com
