Twitter (TWTR) Free-Fall Continues

Twitter (NYSE: TWTR) investors continue to feel the pain. Shares of the social media company are down another 3.2% as three negative analyst comments weigh.

• Morgan Stanley reiterated an Underweight and cut its price target of $18.00 (from $24.00). The firm also lowered '16 non-GAAP EBITDA by 1%. Analyst Brian Nowak said: "Despite any potential benefit from "Moments" or TWTR's 4Q TV ad campaign, engagement – time spent/user – is still falling 20%+ Y/Y. Further, our SensorTower app download data continue to point to a deterioration in user growth, with app downloads -3% in 4Q:15...compared to +5% in 4Q:14. We see weak user growth and engagement leading to lower monetization, as we reduce our '16/'17 revenue by 1% and 3%, respectively. Given the growth in off-network revenue we are also sharpening our forward traffic acquisition cost modeling, which combined with the ad revenue cuts causes us to reduce non-GAAP EBITDA by 1% and 6% in '16 and '17. Our lower numbers reduce our DCF-based PT to $18 (8% downside) and we are still 26% below Street 2017 EBITDA.
• One of RBC Capital Mark Mahaney's Top Ten Internet Surprises For 2016 is Twitter’s MAUs Begins To Decline. Mahaney commented: "In the U.S…. Twitter’s U.S. MAUs have been flattish over the past year at 64MM to 66MM. In the September Quarter, Twitter’s U.S. MAUs grew only 3% Y/Y. The market assumes that given the company’s product innovations and marketing efforts that eventually the MAUs will grow again. But we believe there’s a reasonable possibility that they won’t – that the product and marketing efforts will take a long time to have an impact and in the end may still not be able to broaden the appeal of Twitter"
• Mizuho initiated coverage on Twitter with a Neutral rating and $21 price target. Analyst Neil Doshi has four key concerns about the business:
  • 1. Our mobile survey work shows Twitter's rank among social sites is deteriorating. In June 2015, our 1,000+ person survey of U.S. mobile users indicated that Twitter was the third most popular social app. In November 2015, our 1,000+ person survey indicated that Twitter declined in the rankings, coming in behind others that included Facebook, Instagram, LinkedIn, and Pinterest. And this was five weeks after Twitter's Moments product launched.
  • 2. MAUs Need To Grow. Worldwide MAU growth has been weak the past several quarters and U.S. MAUs have been relatively flat throughout most of 2015. If Moments gains traction, this could help re-accelerate growth, but will take time. We note that Twitter's MAU growth in 3Q15 was below Facebook's, even though Facebook has nearly 5x as many users.
  • 3. U.S. Revenue Growth Deceleration. This is concerning as the U.S. is potentially the largest online ad market in the world. In 3Q15, Twitter's U.S. ad revenue growth was 57% YoY, comparable to Facebook's (off a much smaller base); 4Q15 midpoint guide implies less than 50% growth.
  • 4. Jack Dorsey's Dual CEO-Role. We admire Mr. Dorsey and view him as a visionary among the Internet executives and founders, but running two public companies in two fiercely competitive markets is a Herculean task.

Last week, StreetInsider said the company is ripe for an activist investor. If the the bloodletting continues this may happen sooner, rather than later.

For an analyst ratings summary and ratings history on Twitter, Inc. click here. For more ratings news on Twitter, Inc. click here.

Shares of Twitter, Inc. closed at $19.62 yesterday.

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