Wedbush Thinks Twitter Is Complacent, 'Unfocused' On Lack Of User Growth

Wedbush’s Michael Pachter believes the recent share price appreciation witnessed by Twitter Inc TWTR was driven by speculations that the company might be acquired, although there are no clear-cut potential buyers at present.

Pachter maintains a Neutral rating on the company, while lowering the price target from $20 to $14.

Twitter Is Complacent

“Twitter remains “the place to go” for live broadcast, but management appears complacent about the status quo and unfocused on the lack of user growth,” the analyst mentioned.

Until the company focuses on “attracting new users, driving increased use by its existing users, and demonstrating its value proposition to people who don’t use the service,” Pachter expects Twitter to grow very slowly.

Related Link: Is Twitter The Next Yahoo?

2Q16 Results

For 2Q16, the company reported revenue of $602 million, which was slightly below the consensus, while the adjusted EBITDA of $175 million was well ahead of the consensus and guidance.

Pachter noted that the lower-than-anticipated operating expenses primarily drove the adjusted EBITDA beat. The non-GAAP EPS of $0.13 was also ahead of the consensus.

3Q Guidance

However, the company issued its 3Q16 guidance well below the consensus forecasts, with the revenue guidance remaining the same as that issued for 2Q at $590-$610 million.

The adjusted EBITDA guidance for the quarter is slightly below the guidance for 2Q and well below the numbers reported for 2Q.

At time of writing, Twitter was seen down 10.30 percent at $16.55 within the first hour of Wednesday's regular trading session.

Full ratings data available on Benzinga Pro.