Posted By RichC on August 18, 2016
If I were a bit more savvy and listened to my own advice, I would have traded Twitter ($TWTR) for a few dollars this week. On a downgrade to a SELL by Evercore ISI analyst Ken Sena, shareholders listened and poured their sell orders onto the exchanges after seeing shares climb the last few days on speculation and rumors.
Snapchat is poised to take more marketshare, Evercore ISI analyst said.
Shares of Twitter Inc. slumped 4.2% in midday trade Thursday, after the stock was downgraded to a rare sell rating from hold at Evercore ISI.
Evercore analyst Ken Sena said he turned bearish on the stock as the company appears to be adding broadcasting capabilities as a method of turning around the company. Sena says other social companies are already using broadcasting and other innovations more successfully and drawing in existing (TWTR) users and advertisers. Only 29 of the 665 companies covered by Evercore ISI analysts, or 4.4%, have sell ratings.
"We see more risk than reward, particularly ahead of Snapchat’s anticipated monetization ramp this fall," Sena wrote in a research note.
Twitter recently announced a deal to live stream National Football League games on the platform and has been rumored to be in talks with Apple Inc (http://www.marketwatch.com/story/twitter-shares-soar-after-report-of-apple-tv-talks-2016-08-15).(AAPL) to put a Twitter app on Apple TV. The company has also added Moments, which curates tweets and videos around a topic, and nonlinear timelines.
Sena said he believes innovations fall behind efforts from companies such as Snapchat, which has made changes to its chat function and Discover section, for publisher content.
He was "dismayed" with the company’s revenue forecast for the third quarter, which suggests midpoint growth of about 5%.
As Twitter’s user growth falls behind that of social networks, the analysts say the pricing of its advertisements remains too high.
Twitter shares have had a bumpy year, but they gained 17% over the past month, and have soared 37% over the past three months. The S&P 500 has gained 0.4% month-to-date and 7% in the past three months.
Sena attributes the recent gains to rumors that the company could get acquired by a larger company. But with the recent gains, he said the shares were trading "at or above" what Microsoft paid for LinkedIn, (http://www.marketwatch.com/story/microsoft-buys-linkedin-for-262-billion-2016-06-13) (http://www.marketwatch.com/story/microsoft-buys-linkedin-for-262-billion-2016-06-13) (http://www.marketwatch.com/story/microsoft-buys-linkedin-for-262-billion-2016-06-13) despite have revenue that is less recurring.
-Caitlin Huston; 415-439-6400; AskNewswires@dowjones.com