PacCrest's Wilson: We're Sticking Around In Twitter, Reiterate Overweight Rating

• Twitter Inc TWTR shares are down 19 percent year-do-date, despite breaching the $50 mark in April.
• Pacific Crest’s Evan Wilson maintained an Overweight rating on the company, with a price target of $40.
• Twitter’s new CEO is trying to streamline operations and improve engineering efficiency, Wilson noted.

Twitter announced a restructuring plan involving a near 8 percent reduction of its workforce, especially the Product and Engineering teams. The company’s newly appointed CEO Jack Dorsey is trying to streamline operations and improve engineering efficiency.

Twitter indicated that it would probably meet or beat the high-end of its previous 3Q guidance range of $545-$560 million in revenue and $110-$115 million in adjusted EBITDA. Although the new guidance is encouraging, the focus remains on the company’s stalling user growth, analyst Evan Wilson mentioned.

The company has already unveiled its biggest product update, namely the “Moments” tab, previously Project Lightning. Wilson added, “So far it seems that Dorsey isn't afraid of change, and we're excited to see what's next.”

In the report Pacific Crest noted, “With our analysis of CEO transitions, we found that stocks tend to perform well in the immediate months after hiring announcements, and we see this as an opportunity to take advantage of the halo effect and seeing Dorsey's efforts to turn around the user growth issues.”