Stifel downgraded Twitter Inc TWTR to Sell in a report issued Tuesday after the company reported "sluggish user growth and declining engagement metrics."
Analysts led by Scott Devitt observed that "Facebook's higher monetization levels do not mean Twitter is under-monetized. Twitter has less than 5 percent of the monthly engagement of Facebook, and recent trends at Twitter do not give us reasons to believe that difference will narrow meaningfully. Adjusting for time spent on the platforms, Twitter monetizes at over 4x the rate of Facebook today with less than 5 percent of total time spent."
The report noted that Twitter "posted worrying operating metrics suggesting difficulty attracting and retaining users on the platform. The company added only 13 million monthly active users (MAUs) and Timeline Views per MAU (TV/MAU), Twitter's self-defined engagement metric, declined y/y for the fourth consecutive quarter."
Devitt concluded that "long-term estimates decline materially as slower user growth coupled with potentially unsustainable growth in ad prices eventually leads to significantly lower revenue and earnings estimates. By 2024, our ad revenue estimate declines by $2B to $11.5B."
The report saw $36 as a fair value for the stock.
Twitter Inc recently traded at $42.15 in the premarket, down 13.20 percent.
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