Deutsche Bank Sticks With 3 High-Profile Stocks That Got Hammered
This stock’s hammer job was a double shot for shareholders. First the company’s earnings were released early by accident, and second, and most importantly, they were horrible. Twitter had transformed from the stock that everybody hated to the one that everybody is starting to love. High multiple valuations, issues with the current CEO’s performance and overall terrible negative market sentiment trampled the stock for years and actually made it a favorite target of short sellers, after fading quickly after a very quick one-month post-IPO spike (IPO). Those are all issues being mentioned again.
The Deutsche Bank team points out that while a key stat called monthly average users was fine, the revenue miss was bad and the stock got crushed. They also highlight that the stock’s high multiple and volatile quarterly revenue results create huge swings in investor sentiment.
The analysts make two very valid points. The DR advertising revenue issues are possibly an easy fix in the medium term. They also remind investors that the Google traffic partnership is a catalyst that lies in front of the stock. They are buyers of the stock below $40 as the long-term view is still positive.
The Deutsche Bank price target is lowered to $60 from $65. The consensus target is $54, but that number will drop when all the new downgrades and price targets are figured in. Twitter closed Wednesday at $38.49, down another 8.94%.
This high-flying gaming stock, and others in the industry, have been hit hard by issues more attributed to holdings in Macau than in the United States. The company also cut the dividend paid to shareholders, and that did not go over well either, combined with a revenue miss. The company reported that first-quarter profit fell to $0.70 per diluted share, less than a third of the $2.32 the company reported earning in the year ago period, and significantly less than the $1.19 analysts were expecting the company to earn this quarter. Revenue for the quarter was $1.09 billion, also missing analysts’ $1.21 billion expectations.
The Deutsche Bank analysts say that despite the very challenging fundamentals, that they are sticking with the firm’s rating of Buy on the stock. They say that despite the difficult Macau situation, and a tough to call inexpensive valuation, that the huge resort opening in Cotai this time next year could be the hidden gem for the company.
They also think that even though the Macau business is slowing, the Wynn resort there is still considered high end, and the company will be able to capture more overall market share as the mid-level players start to play and migrate more to the property.
Wynn investors are now paid a $0.50 per share dividend, versus the former $1.50 per share per quarter. This would translate to approximately 1.85%. The Deutsche Bank price target is dropped to $135 from $156. Shares closed Wednesday at $108.77, down a massive 16.65%.
Catching the proverbial falling knife is not for the faint of heart, nor for conservative accounts. In addition, waiting until all the carnage has been exacted may be the best move. For aggressive accounts that still believe in the long-term stories, these could be huge winners down the road.