Evercore ISI downgraded Twitter, Inc. (NYSE: TWTR) from Buy to Hold with a price target of $39.00 (from $49.00).

Analyst Ken Sena comments, "Twitter’s management has been clear that targeting, creative and measurement are three areas where their business stands to improve, speaking specifically to its Direct Response efforts, but we believe this to be true for the platform more broadly. And as visibility around Twitter user growth has diminished, and we no longer have the same conviction we once did that Twitter under-monetizes on the basis of its overall influence, the result is a more conservative view of valuation and the company’s long-term growth prospects. Our revised target ($39 from $49) places Twitter at 27x our 2017 Adj. EPS of $1.50 (x-SBE). However, given that Twitter’s SBE will still represent about 15% of revenue in 2017 whereas non-GAAP income represents 22%, we acknowledge that shares trade closer to 90x ’17 earnings on a GAAP basis, clearly demonstrating that much of the Twitter story rests on future expectations."

The firm is lowering 2016 revenue estimate by 7% to $3.3bn (or 50% y/y), roughly in-line with the Street. This implies an ARPU of $9 compared to the $14 they currently estimate for Facebook. Meanwhile, they are reducing EBITDA by 15% to $1.1bn or 34% of revenue from 38% previously. They are leaving our 2Q15 estimates effectively unchanged, which were already downwardly adjusted following the company’s recent miss, at $479mm in revenues (+53%), 8mm in MAU adds (to 310mm), and $103mm in adj. EBITDA (22% of revenue), all in-line to slightly below consensus, bringing them to a $39 target price.

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Shares of Twitter, Inc. closed at $37.00 yesterday.