Twitter Following Yahoo Down The Path To ‘Ex-Growth,’ Downgraded
Twitter ( TWTR ) stock sank again Tuesday after getting downgraded by Stifel analyst Scott Devitt, who warned of sluggish growth in 2016 for the social media site. Stifel lowered its rating on Twitter stock to sell from hold, but it maintained its price target of 14. Twitter stock was down more than 9% in afternoon trading in the stock market today , near 16 and near its all-time low of 15.48, touched on Jan. 20. Twitter stock has struggled below its IPO price of 26 since mid-December. Twitter stock is down 37% from its IPO price and is down 57% in the past 12 months. “We think the company will be challenged to reach its near- and long-term financial expectations given its current usage trajectory,” wrote Devitt in an industry note late Monday. Due to “a lack of product innovation and limited sense of urgency,” Devitt said, “Twitter’s monthly active user growth continues to slow and is at risk of turning negative in 2016.” “If Twitter is in the early stages of following a similar path to ex-growth as AOL ( AOL ) and Yahoo ( YHOO ) experienced before it — as seems to be the case — then there is likely more downside for Twitter common stock,” Devitt said. “More recently, Groupon ( GRPN ) and Zynga ( ZNGA ) were notable Internet companies that quickly rose to prominence followed by a rapid decline in their share prices. Although these companies are not at Twitter’s scale, both still have 50 million users and once had many more.” Facebook ( FB )continues to generate over twice as much ad revenue per U.S. monthly active user as Twitter, said Devitt, and Facebook users spend 10 times as much time on Facebook’s site than Twitter users spend on Twitter. Twitter has long been rumored as a takeover candidate. Besides facing competition from Facebook and others, Twitter is struggling to expand its user base. It has launched programs to reel in “logged out” users who visit Twitter’s site but don’t have accounts of their own, making them less coveted by advertisers. Twitter posted Q3 earnings and revenue that beat Wall Street views, but its user growth slowed and its Q4 sales guidance missed analyst estimates. For Q4, Twitter guided revenue of $695 million to $710 million, up 46% at the midpoint, but analysts had modeled $739.7 million. Analysts polled by Thomson Reuters expect Q4 EPS ex items of 14 cents, up 17%. Twitter is set to report Q4 earnings after the close Feb. 10.