Twitter (TWTR) Cut to 'Underperform' at Oppenheimer Following Recent Surge; Analyst Values Stock at $17/Share
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(Updated - September 26, 2016 9:23 AM EDT)
Oppenheimer cut Twitter (NYSE: TWTR) from Perform to Underperform after shares surged amid reports Friday that it's nearing a sale. Analyst Jason Helfstein highlighted slowing user growth, decreasing user engagement and other issues facing the company, and he doesn't expect an acquirer to pay more than valuation implied by his $17 price target.
"Based on slowing user growth, poor product implementation/ execution, decreasing user engagement, inferior advertising technology, platform safety issues, and strong competition, we believe shares are fully valued at $17, or 13x '17E EBITDA, barring a take out. We believe a media company is the most likely purchaser and would not pay meaningfully more than the valuation implied by our price target," said Helfstein.
"Twitter's Mobile App Unique Visitor growth significantly trails peers Snapchat and Pinterest. Twitter's mobile app UVs grew 10% in August vs. 32/77% for Pinterest/Snapchat, respectively. We believe that Twitter's user interface is difficult to learn, dissuading users from joining. User safety issues have also taken a toll," continued the analyst. "Engagement, as measured by Total Minutes/ Unique Visitors, indicating time spent on the platform, fell 9% y/y in August. This decrease in engagement is part of a longer term trend: in January 2016 users were spending 153 min./month on the platform vs. 143 min./month today. In August, Snapchat users spent 266 min./month on the platform."
Helfstein added, "We believe that Twitter is overvalued compared to its peers, and is already discounting a take-out premium. Moreover, any acquirer would have to cash out employee options and make large capital investments to improve the user experience and advertising technology."
Shares of Twitter, Inc. closed at $22.62 yesterday.
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