Twitter Has 12% More Downside On Weak Traffic, Evercore ISI Warns
- Twitter Inc (NYSE: TWTR) shares have lost 31 percent in the last six months, even after hitting a high of $36.54 on July 28.
- Evercore ISI’s Ken Sena maintained a Hold rating on the company, while reducing the price target from $25 to $22.
- The company is losing ground to competitors and facing weak traffic, Sena stated.
Twitter witnessed relatively weak traffic trends in October and November, analyst Ken Sena said. An analysis of data from Evercore ISI’s survey and comScore figures indicated that Twitter continues to lost ground to faster growing competitors, such as Instagram and Snapchat, despite having made several product improvements in 2015.
Twitter witnessed a continued decline in total minutes on the platform through November. The decline was in mid-single digits in the US. In comparison, other social platforms recorded double-digit growth, and that too with larger bases. Instagram is now 150 percent larger, while Snapchat is 50 percent larger.
Sena pointed out that Twitter’s performance was despite multiple major product launches and the company’s partnership with Google. He wrote, “Although we do not have December data yet, the data through November suggests to us that the Street’s 325mm MAU estimate (or 5mm net adds, reflecting an acceleration from 4mm in 3Q) may be too optimistic.”
Sena expects core US ad revenue growth to be below 20 percent y/y in 4Q, as compared to 66 percent last year.
He mentioned, “We arrive at this estimate by looking at the company’s 4Q revenue guidance, their new disclosure for on and off-network revenue, and then applying an assumption for the amount of off-network revenues that occur domestically, which the company has indicated to be the majority.”
The analyst added that although off-network continues to record strong growth, the associated TAC could ultimately have a significant impact on margin leverage, which the Street’s 2016 EBITDA estimates do not take into account.
Latest Ratings for TWTR
|Oct 2016||Goldman Sachs||Maintains||Buy|
|Oct 2016||Loop Capital||Upgrades||Sell||Hold|
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