Morgan Stanley Cautious On Twitter's MAUs, Monetization Potential And Sustained Advertiser Growth

• Shares of Twitter Inc TWTR have plummeted 45 percent since November 11, 2015, and are currently trading near their 52-week low of $14.31.
• Morgan Stanley’s Brian Nowak maintained an Underweight rating on the company, with a price target of $18.
• Twitter needs to work on improving the safety of its platform, besides making it easier to use, Nowak stated.

Twitter’s 4Q15 results revealed that its Monthly Active Users in the U.S. and internationally declined for the first time. The company’s weaker-than-expected 1Q guidance highlighted concerns around the platform’s growth and monetization potential, analyst Brian Nowak stated.

The decline in the company’s MAUs reflects the challenges faced by it in growing its user base. “We see this first quarter of sequential user declines returning the “addressable user market” question to the front burner,” Nowak wrote.

The analyst expressed caution regarding Twitter’s monetization potential and added, “To become more bullish, we look for signs of sustained improvements around advertiser growth and TWTR’s ability to grow its share of ad budgets.”

Twitter needs to focus on improving the ease of use and onboarding, live streaming video besides making the platform safer.

“TWTR is trading below our DCF-based price target, but we struggle to see the asset materially re-rating until the MAU questions are answered,” the Morgan Stanley report mentioned.