Twitter stock got hammered today after the company’s earnings disappointed yet again. User growth is still a concern, although the micro-blogging platform came out slightly ahead of the consensus on that metric. Perhaps the bigger negatives this time around were the miss on the top line and the second quarter outlook.
Twitter stock tanks in heavy volumes
Twitter shares plunged 15.75% to as low as $14.96 in what was an extremely active trading day for the stock. By 10:15 a.m., nearly 31 million shares of Twitter stock had changed hands, surpassing the average daily volume of 20.3 million shares. By 2:35 p.m., nearly 65 million shares had changed hands as the stock was on track for its largest one-day decline by percentages in a year, almost to the day.
JPMorgan analyst Doug Anmuth and team downgraded Twitter from Neutral to Overweight and slashed their price target from $26 to $18 per share following last night’s earnings report, although they are still bullish on the platform’s use case. They noted that the company has been slower at pushing out product changes than expected and that those changes have not been as impactful as they had thought they would be. Further, Facebook, Instagram, Messenger and Snapchat are circling, and they’re concerned that competition is narrowing Twitter’s growth opportunities, both in terms of users and ad dollars.
Is Twitter losing share in digital advertising?
Oppenheimer analyst Jason Helfstein and team maintained their Perform rating on Twitter stock but warned that the softer brand indicated in last night’s earnings report suggests that the micro-blogging platform is ceding share to competitors. They note that ad revenue growth decelerated to 39%, although ad engagement accelerated sequentially to a 208% growth rate year over year.
They also point out that brand advertisers in particular didn’t increase their spend in the first quarter, and Twitter management said greater spending on video auto-play ads is cannibalizing the legacy Promoted Tweets ads. Additionally, the Oppenheimer team said U.S. growth now depends more on budget penetration rather than new advertisers.
They also point out that while the micro-blogging platform is adding new enhanced features later this year, bigger competitors already have them, which they think could make it difficult for the company to gain share during major events like the Olympics and U.S. presidential elections. The Oppenheimer team also warns that brand marketers shifting some of their budget to faster growing social networks could be yet another headwind.
Other price target cuts for Twitter stock
Lots of other analysts also cut their price targets for Twitter stock. Monness, Crespi, Hardt analysts cut their target from $25 to $22 per share, while SunTrust Robinson Humphrey analysts trimmed their target from $20 to $18. Also UBS analysts slashed their target for Twitter stock from $30 to $24 per share, and Wells Fargo cut its valuation range from $19 to $21 to between $15 and $16 per share.
Deutsche Bank analysts trimmed their price target for Twitter stock from $23 to $25, while Morgan Stanley’s target moves from $16 to $14.50.
