Shelved TikTok deal shakes Walmart; analysts cheer Twitter's newfound 'swagger'

Twitter Inc. may have had a rough start to 2021 after the riot in Washington, D.C., but analysts believe the social media platform has once again found its footing.

Shares in Twitter jumped by as much as 20% this week as investors praised the social platform's better-than-expected earnings results in the just-ended period. Speaking on a Feb. 9 earnings call, Twitter CFO Ned Segal said ad demand came in "stronger than expected" throughout the December 2020 quarter, barring a "short period" surrounding the U.S. presidential election in November 2020. He also confirmed reports that Twitter is working on a non-advertising subscription-based service to diversify its business, though cautioned the company is "still early" in the process.

Reports have indicated the company might charge some power users for services such as Tweetdeck, which allows users to view multiple feeds and accounts at once, as well as advanced features like "undo send" and profile customization. The company may also charge fees for ad-free feeds, higher-quality videos, account verification and analytics.

Pivotal Research Group senior analyst Michael Levine upped his price target on Twitter stock to $77.25 from $67, noting the company's ad business showed "meaningful acceleration" across all regions, and both brand and direct response advertising also improved. He expects Twitter to build upon its upward momentum in 2021.

"Both on the earnings call and analyst call back, we felt that management led with a swagger and confidence we have not seen in some time," Levine wrote in a Feb. 10 report.

Twitter closed Feb. 11 at $68.56 per share.

Meanwhile, Walmart Inc. and Oracle Corp. stock dropped slightly this week as analysts mulled reports that the Biden administration shelved joint efforts from the retail and tech giant to buy video-sharing app TikTok Inc.'s U.S. operations from Chinese parent Beijing Byte Dance Telecommunications Co. Ltd. The Wall Street Journal first broke the news on Feb. 10, citing sources familiar with the matter.

Many analysts said they were not surprised the deal is in jeopardy, given how it dragged out for months since first announced last year. But they believe the dissolution of the deal limits what would have been a compelling opportunity for a legacy brand like Walmart to boost its digital advertising business and gain unique access to young adults in Generation Z, the majority of whom are still under the age of 18. TikTok is a top platform for members of that generation.

Walmart shares closed Feb. 11 trading down under 1% for the week to-date, while Oracle closed down 1.42%.

Outside of tech, Fox Corp. and Altice USA Inc. stock moved in opposite directions as analysts digested the companies' respective earnings reports for the just-ended quarter.

Fox on Feb. 9 posted better-than-expected results on the top and bottom line and also saw its advertising revenue expand by double-digits in the company's fiscal second quarter. Ad revenue grew 14% to $2.28 billion for the just-ended quarter, Executive Chairman and CEO Lachlan Murdoch told analysts on the company's Feb. 9 earnings call. The gain was driven by record political spending on the company's TV stations, continued linear and digital growth at Fox News Media, and the impact of consolidation of streaming service Tubi, which Fox purchased in April 2020, Murdoch added.

Fox closed Feb. 11 trading up 1.85% for the week to-date, at $32 a share.

Altice on Feb. 10 posted fourth-quarter 2020 earnings results that beat analysts' estimates, but lost a net of 4,000 residential broadband revenue-generating units for the period.

New Street Research analyst Jonathan Chaplin said of the results, "Financials were ahead this quarter, but broadband subscribers came in below expectations." He noted executives had previously warned of pressures from COVID-19-related offerings and storms. "Excluding these factors, they delivered on what they said they would do," Chaplin concluded.

Evercore ISI James Ratcliffe in a report noted that Altice's results contained no "major surprises," and is bullish on the company's continued ability to deliver "solid EBITDA growth through modest revenue growth and margin expansion, while it deploys its free cash to aggressively shrink the equity base." The analyst maintained his "outperform" rating and $44 price target on Altice shares.

Shares in Altice closed the Feb. 11 trading session down 6.02% for the week-to-date at $34.65 each.