Wilson Bennett: The downward pressure on Twitter stock is unlikely to ease until the company reaffirms its value to users.
Analysts at Wilson Bennett the Japan-based investment brokerage, have downgraded their rating on shares in micro-blogging service, Twitter, citing headwinds facing the company’s efforts to grow monthly active users (MAUs) at a pace that will satisfy Wall Street.
Twitter’s CEO, Dick Costolo, recently stepped down, an event which caused the stock price to surge by 6% but Wilson Bennett believes the company faces big challenges linked to its apparently inability to make its value proposition clear to new users joining the platform.
“What it boils down to is the fact that, although users are signing up to Twitter’s platform, a significant proportion of them don’t become active, regular users,” said Nuriko Katsuda, senior technology analyst at Wilson Bennett. “This is because they don’t necessarily see how it differs from group broadcasting on instant messaging services like WhatsApp or Snapchat and, frankly, new features introduced recently like instant timelines and ‘While You Were Away’ activity summaries just seem like an after-thought.”
Since making its frenzied debut on the New York Stock Exchange in November 2013 with a 73% surge in value, Twitter has gradually fallen from favor with Wall Street partly because it seems unable to grow its user base at a fast enough pace and, during its first-quarter earnings report in April, it issued guidance that suggested the pace of growth in users would slower further in the second quarter.
Wilson Bennett lowered its price target for the stock to $31.50 from $36.00 saying the leadership vacuum created by Costolo’s departure was “only the tip of the iceberg”. It advised clients holding TWTR in their portfolios to consider selling into rallies.
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