Twitter, which is undergoing a management shakeup, got its price target reduced by Axiom Capital’s Victor Anthony. The analysts reiterated their Hold rating on the micro-blogging firm but lowered their price target to $40 from $45 owing to lower expectations regarding user growth this quarter.
MAU to miss consensus
The analyst is positive long-term on the “monetization opportunity” and believes that the near-term direct response challenges can be resolved but is cautious until there are visible signs of fix available for user growth, engagement and recent monetization.
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For the second quarter, Anthony now expects a monthly average user base of 302 million compared to 309 million earlier and the consensus estimate of 310 million. A downward revision in the estimate is based on outgoing CEO Dick Costolo’s comments last week when he said that the second quarter is not witnessing the same level of “seasonality, organic growth, and growth initiatives” that were seen in the first quarter.
Is Twitter on the right path?
Twitter shares continue to slide following last week’s management shakeup. Costolo announced his exit from the CEO post, which for the time being will be filled by founder Jack Dorsey.
Such a high level of management shakeup was evident as the micro-blogging firm posted its weakest quarterly revenue growth in April along with dismal ad engagement numbers. The numbers appear more dismal if we consider that for the same period, rivals like Facebook performed well.
Despite the change in management, analysts are not very optimistic on the micro-blogging firm. To Wells Fargo analysts, the strategy from the company appears confusing. Twitter’s product and its positioning “remain confusing and ill-defined,” said Wells Fargo analysts.
On Monday, the stock was caught in a bit of a controversy. A report from the Financial Times quoting Saudi Arabia’s Prince Alwaleed bin Talal, who was one of the initial investors in Twitter, said he is not in favor of Dorsey becoming full-time CEO. But later, another report from CNBC cited a statement from Alwaleed which termed the FT report as “wrong,” adding that Alwaleed, in fact, is in favor of Dorsey being named as permanent CEO.
Over the past three months, shares of the micro-blogging firm have declined by 25% compared to a gain of 1.6% for the S&P 500. On Monday, Twitter shares closed down 3.45% at $34.66, and year to date, the stock is down by over 3%.