Morgan Stanley Downgrades Twitter, Inc. (TWTR) to Underweight
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(Updated - October 21, 2015 6:40 AM EDT)
Morgan Stanley downgraded Twitter, Inc. (NYSE: TWTR) from Equalweight to Underweight with a price target of $24.00 (from $36).
The analyst cited 1) limited user growth and declining engagement, 2) lack of material incremental advertiser demand, 3) an already high ad load and high ad pricing, 4) rising mobile competition holding back earnings power.
"In our view, Street number haven't taken these challenges into account either, as we find ourselves 14% and 25% below 2016 and 2017 EBITDA. We see negative revisions and a lofty valuation - Twitter now trading at 6.3x 2017 revenue and 19.2X EBITDA - driving underperformance."
The firm cut FY 2016 non-GAAP EPS from $0.62 to $0.59 and FY 2017 non-GAAP EPS from $1.02 to $0.83.
Further the analyst asks if Twitter's ad load has hit a ceiling. "By our math, TWTR's ad load is already 10x higher than FB when adjusted for time spent,' the analyst commented.
Shares of Twitter, Inc. closed at $30.91 yesterday.
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