Twitter Shares Down 17% This Week; Cowen Sets New Rating

In a report published Wednesday, Cowen and Company analyst John Blackledge initiated coverage on

with an Underperform rating and $32.00 price target. Blackledge commented that his initiation rating and price target in based on the firm's concerns over price and ad inventory as revenue drivers. Cowen surveyed 50 ad buyers and analyzed Twitter's user base, engagement, and ARPU and SMB ad campaigns. From the survey of ad buyers, the analyst commented that "Only 5% of respondents thought Twitter offered the highest ROI on ad spend, well below FB (60%) and LNKD (25%). Additionally, we asked respondents to rate the platforms across multiple attributes and TWTR scored below average marks for ROI (9% below average). The data suggests the low ROI rating is tied to pricing, as respondents commented “high minimum spend” and “cost of campaigns” were negative points for TWTR's advertising value proposition." Cowen reported that material ad pricing is not an instrumental lever for revenue for Twitter. In addition, Twitter's engagement in Timeline Views per MAU and in 2013 y/y growth decelerated reflecting the decline in U.S. and International growth. Although the company's active users is up 39% y/y in 3Q13, user growth is also decelerating. Blackledge's 2014 and 2015 revenue estimates are 10% and 13% below consensus, respectively. The analyst estimates $630 million in 2013 revenue and increasing to $3.2 billion in 2018. Twitter closed at $59.29 on Wednesday and shares are currently down as much as 3.45% at $57.31.