The few analysts that were recommending Twitter stock are starting to turn their backs on it. Deutsche Bank and Loop Capital downgraded it after Thursday’s earnings report, while JPMorgan slashed its price target. It seems even President Trump can’t save the micro-blogging platform despite his constant use of it to make often-inflammatory remarks.
Analysts are also talking again about whether it would make a good acquisition target, although some feel that potential suitors will wait for another decline in Twitter stock before making an offer.
Twitter’s user growth is stagnant, but engagement spikes
Data from Verto Analytics indicates that the platform’s growth has stagnated compared to its competitors Facebook and Snapchat. However, it seems that Twitter is the first stop for social media users making comments on events, as usage spikes during and immediately after major events, while Facebook usage doesn’t spike until about two days after such events, Verto found.
The firm said 62% of users are accessing Twitter on the Web, while only 37% use it on mobile devices. Given the growth of mobile and how the popularity of Facebook’s mobile app has grown rapidly with the growth in mobile, this could be a key problem for Twitter. The platform has failed to find wide appeal among mobile users, while Facebook banks big ad revenues on them. Perhaps this is one area in which Twitter should focus its efforts, as Facebook’s history shows that without a successful transition to mobile, a social media network can’t excel.
Interestingly, Verto also found that Twitter has more sessions on its mobile app, with 50 per mobile user to five sessions per website user.
Twitter stock downgraded by Deutsche Bank
In a research noted Feb. 10, Deutsche Bank analyst Lloyd Walmsley downgraded Twitter stock from Buy to Hold. He also slashed his price target for Twitter stock from $22 to $15 per share due to challenges in direct response and branded ads and stagnant growth in monthly active users despite the publicity via President Trump. The analyst also reported that his recent checks among large advertisers suggest that they’re preparing to shift some of their budgets away from Twitter.
He finds the pivot toward live video as “promising” but notes that it will take some time to ramp this strategy and brings with it “uncertain unit economics” such as revenue sharing and infrastructure costs.
Loop Capital analyst Blake Harper downgraded Twitter stock from Hold to Sell and slashed his price target from $16 to $10 per share. He also noted that neither Trump nor the NFL live streams have had any impact on user growth. He doesn’t believe a turnaround is imminent, given stronger and “more resourceful competitors offering advertisers what it can not [sic].”
Twitter stock target to $14
JPMorgan analyst Doug Anmuth left his rating on Twitter stock at Neutral but trimmed his price target from $17 to $14 per share. He suggested that a sale of the company is becoming even more likely, but he believes that Twitter stock will have to fall further from current levels before any acquirer might make an offer. He does see the platform as a “valuable and differentiated” one, but he called it “more broadcast news than social media and inherently more difficult to monetize online.”
Stifel analyst Scott Devitt agrees, stating in his report that acquirers might see a value of more than $10 per share, he feels that Twitter stock might still have to fall “meaningfully” from where it stands now before “productive M&A conversations heat up.” He reiterated his $10 price target and Sell rating on Twitter stock.
Shares of Twitter stock fell another 5.3% to as low as $15.54 during regular trading hours on Friday after falling off a cliff on Thursday due to the company’s disappointing results.
