Victor Anthony Downgrades Twitter, Sees Limited Visibility

Twitter Inc TWTR has now provided its revenue guidance below the estimates for three consecutive quarters, while there is limited visibility into a reacceleration in advertising growth.

Axiom’s Victor Anthony downgraded the rating on the company from Buy to Hold, while lowering the price target from $18 to $16.

Disappointments

Anthony expressed disappointment with the continued weak user growth, the advertising revenue miss and 3Q guidance being meaningfully below the estimates, implying that O&O advertising was likely to grow in the high single digits.

“Management cited increased competition for social media ad budgets, a continuation of lower advertiser demand, and ad pricing at a premium to other platforms. These headwinds are expected to persist and there is very little visibility into the timing of O&O advertising growth re-acceleration,” the analyst mentioned.

Related Link: Goldman Sachs Still Sees Significant Value In Twitter

What Can Help?

Anthony believes the saving grace, and in fact the last stand, for Twitter is live events and Periscope, which are expected to drive engagement and advertising to the platform.

However, the analyst also expressed doubts about whether this would be enough to offset the current challenges.

“We continue to believe that Twitter is an acquisition target but M&A is unlikely to occur this year. The speculation however should keep the shares range-bound in the mid-teens,” Anthony stated.

2Q16 Results

For 2Q16, Twitter reported its revenue below the consensus and the estimate, although the adjusted EBITDA beat expectations, driven by lower R&D expenses.

The Non-GAAP EPS also beat expectations for the quarter.

At time of writing, Twitter was down 11.92 percent in Wednesday's pre-market session, trading at $16.25.

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