For Twitter, There's Still A Lot Of Work Ahead

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  • Shares of Twitter Inc TWTR have been trending south in recent months, down 45 percent since November 11, 2015.
  • Barclays’ Paul Vogel maintained an Equal Weight rating on the company, while reducing the price target from $33 to $19.
  • Twitter needs to take steps to improve engagement amongst its current as well as new users, Vogel stated.

Twitter reported in-line revenues for 4Q15, with the EBITDA significantly ahead of expectations. The company’s MAUs excluding “SMS Fast Followers,” however, contracted on a sequential basis for the first time. The company clarified that the trend had corrected in 1Q itself.

The company’s 48 percent year on year advertising revenue growth in 4Q was driven by its emerging “Off-Network” platform. In contrast, Twitter’s “Owned & Operated” platform continued to lag and the trend is expected to continue in the current quarter too, analyst Paul Vogel stated.

Vogel expects Twitter’s restructuring and optimization efforts to have a favorable impact on the company’s operating costs and bottom line.

“We are encouraged by the pace of innovation following the leadership changes at Twitter over the last 6 months. Company initiatives seem more focused (Periscope / live video integration, algorithmic timelines, etc.), and we applaud the increased focus on cost management,” the Barclays report stated.

Vogel pointed out that several issues relating to the services, including retaining new and logged out users, overall lack of user growth or engagement, needed to be resolved.

“We believe Twitter will be able to continue to narrow the monetization gap internationally and further increase engagement among current and new subscribers given new products and features,” Vogel added.

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Posted In: Analyst ColorPrice TargetAnalyst RatingsBarclaysPaul Vogel
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