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Barclays On Twitter: Waiting On M&A Isn't Much Of A Thesis

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Barclays On Twitter: Waiting On M&A Isn't Much Of A Thesis

“Despite all the execution issues over the years, Twitter Inc (NYSE: TWTR) sees continued bouts of M&A speculation, which highlights the scarcity value for independent mobile businesses with scale,” Barclays’ Ross Sandler said in a note, while initiating coverage of the company with an Underweight rating and $14 price target.

Some Positives

The analyst expects Twitter to remain “central to most news flow globally,” while viewing the recent shift to premium video as “one of the more promising ideas” for an information network like Twitter.

Sandler pointed out that the daily average users (DAUs) have been accelerating, driven by some of the “subtle product tweaks” implemented by the company in 2016. This could potentially drive a return to revenue growth for the company in the second half of this year, following the integration of programmatic.

Related Links: Don't Look Now - Twitter Shares Approaching Rumored Potential Takeout Price

Concerns

On the other hand, the analyst also noted Twitter continues to be adversely impacted by its larger network peers, which offer similar products, due to which its value proposition for advertisers has been diminishing.

In addition, the company has a long track record of execution issues and employee turnover, which appear to be worsening in 2017.

“Revenue growth has turned negative in the core owned and operated advertising business, which should weigh on profitability over time,” Sandler stated, adding that the stock remained expensive, given the lack of growth.

The analyst believes “M&A speculation is likely to happen again at some point, but we don’t think in 2017, and if fundamentals continue to erode …investors will have a chance to initiate positions at lower levels.”

Latest Ratings for TWTR

DateFirmActionFromTo
Nov 2020Morgan StanleyMaintainsEqual-Weight
Nov 2020Canaccord GenuityMaintainsHold
Oct 2020OppenheimerMaintainsOutperform

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