Twitter Has 'Deep Value' If You Can Tolerate Risk, Argus Analyst Says

• Shares of Twitter Inc TWTR have declined 36 percent since January 4 this year.
• Argus’ Jim Kelleher reiterated a Buy rating on the company, while reducing the price target from $45 to $24.
• Relative underperformance in Twitter shares has created an attractive entry point, but the company needs to take steps to boost its growth, Kelleher stated.

Twitter reported in-line 4Q15 top line results but with no sequential growth in its monthly active users or MAUs. The company’s advertising revenue growth remained strong despite an unanticipated currency headwind.

The company’s CEO, Jack Dorsey, intends to take steps to make services easier to use and more appealing to “creators and influencers.” Twitter aims to bolster its live streaming video services, strengthen its platforms besides improving relationships with developers.

“While these are all worthy goals, they will be incidental if the company cannot rekindle growth in MAUs,” analyst Jim Kelleher mentioned.

The analyst pointed out that Twitter needs to boost the number of its users in the U.S., where ad revenue per user is significantly higher than worldwide ad revenue per user, in order to restore growth.

“The return of Jack Dorsey and his clearly focused five-part agenda could help operating efficiency and create a better platform; whether it can rekindle user growth is yet to be seen. We expect the company to strengthen its franchise, but process will likely take longer than earlier envisioned,” the Argus report stated.

Kelleher pointed out that investment in Twitter is appropriate for risk-tolerant investors with a long-term time frame.