Analyst Sees Next Leg Of Downside For Twitter 'Possibly Extending Beyond' 12 Months; Upgrades To Hold

In a report published Monday, Stifel analysts upgraded the rating on

from Sell to Hold, saying that the company's shares appear to be "mispriced" in view of its "growth prospects and competitive position over the long-term." In the report Stifel noted, "Following the recent share price sell-off, three factors lead us to believe that the next leg down for Twitter shares may take an extended period, possibly extending beyond our 12-month ratings horizon." M&A Speculation: Although there are no formal reports of any M&A discussions, the market seems to be speculating that

Google may buy Twitter. "Google may have interest in Twitter at some price but we find it unlikely that price would be at a premium to current levels. Twitter is struggling and Google is throwing it a lifeline via partnership and we believe Google, as a historically smart buyer of assets, would know better than to assist in stabilizing a business (possibly increasing its valuation) if it were actively pursuing the asset," the analysts explained. Management Change: The market is speculating of a management change. "If management did change, the stock may rise because the new management would get an extended leash to prove itself before the reality of the business set in again," the analysts wrote. Product Changes: Although Twitter has made changed to its site, its core product remains relatively unchanged. "We don't think much has changed and we are skeptical that much will change, but we don't want to wait it out from these lower levels," the report said.