Mark Mahaney Thinks Twitter Has Hit A Wall
In a report published Wednesday, RBC Capital analyst Mark Mahaney maintained a Sector Perform rating on Twitter Inc (NYSE: TWTR), while lowering the price target from $47 to $41. Although the Q2 results beat the estimates, the analyst believes that trends are deteriorating.
"TWTR reported beat & lower Q2, with the all important user metrics coming in light," Mahaney stated.
The company's Q2 revenue was meaningfully ahead of the consensus and the estimates, while the EBITDA was also higher than expected, driven by a robust topline. Twitter also announced its Q3 revenue and EBITDA guidance below the estimates, while tightening its 2015 revenue guidance range.
However, the Q2 MAU results were below the estimates, with the company adding only 8 million MAUs quarter-on-quarter, "with NO MAU growth in the U.S. and most of the Int'l MAU growth coming from low-monetization SMS users," according to the RBC Capital report.
The management's MAU outlook was also soft, and the analyst believes that Twitter is hitting a wall, with continuing revenue growth deceleration and the absence of meaningful margin leverage.
In fact, while the Q2 EBITDA margin was ahead of the consensus, the leverage was the lowest since 1Q14.
The analyst also expressed concern regarding the lack of clarity regarding whether product/IU changes could drive stabilization or reacceleration of the user and usage metrics.
In addition, channel checks and surveys have failed to provide evidence that a significant number of advertisers would be willing to commit meaningful dollars to Twitter.
"Our concern for some time has been that Twitter's lack of realtime commercial intent or detailed, authenticated profiles will eventually limit TWTR's growth potential," Mahaney added.
Latest Ratings for TWTR
|Nov 2016||OTR Global||Downgrades||Mixed||Negative|
|Oct 2016||Goldman Sachs||Maintains||Buy|
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