Twitter Is More Risk Than Reward Right Now; Evercore Downgrades Stock To Sell

Major social platforms are investment huge amounts of funds into data infrastructure and R&D. Twitter Inc TWTR could face significant risks as competing social platforms hone their broadcasting capabilities, Evercore ISI’s Ken Sena said in a report.

He downgraded the rating on Twitter to Sell, lowering the price target from $18 to $17.

Advances in the Cloud is changing the way people consume content and shop as well as manage their home, car and even body. Meanwhile this is also boosting online adoption in lesser penetrated regions of the world. All these factors point towards “an explosion in device touchpoints and data over the next five years,” analyst Sena mentioned.

As Cloud advances in mobile, an increasing number of computing touchpoints are being created, which feeds several major Big Data trends, “from analytics and automation to machine learning,” Sena added.

Related Link: 10 CEOs You Need To Follow On Twitter

Core Concerns

Referring to Twitter’s stock valuation, the analyst commented, “[A]s broadcasting capabilities permeate competing social platforms that are winning influence with Twitter users and advertisers, as evidenced by traffic patterns and management commentary citing its ad pricing premium, we see more risk than reward, particularly ahead of Snapchat’s anticipated monetization ramp this fall.”

Twitter’s execution is also a concern. The company’s Q3 revenue guidance implies merely 5 percent growth at the mid-point, which is about a tenth of the recent growth posted by Facebook Inc FB on roughly a tenth of Facebook’s revenue scale, Sena noted.

While Twitter continues to struggle with usage growth and engagement, its product rollouts and enhancements have been mixed and its ad pricing is “too high relative to its major online competitors,” the Evercore report stated.

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