Shares of Twitter Inc (NASDAQ:TWTR) slipped 45 cents, or 2.42 percent, to $18.18 in Thursday’s extended hours, after RBC Capital’s Mark Mahaney downgraded the name to ‘Underperform’ from ‘Market Perform’ with a $14 from $17 target, noting that based on the firm’s recent survey data, Twitter’s “value proposition to advertisers” is deteriorating.
Mahaney also said that while the social media platform is a “unique asset with a strong value proposition to core users,” RBC’s survey results of about 1,100 advertising experts showed that they were planning to direct more online ad dollars to companies such as Google-parent Alphabet (NASDAQ:GOOGL) and Facebook (NASDAQ:FB).
The analyst added that 26% of respondents plan to increase their ad spending on Twitter, versus 28% indicating they are likely to decrease their Twitter ad spending. More importantly, 35 percent of respondents didn’t spend any money advertising on Twitter, up 5 percentage points from February.
“This is the weakest result we have seen and the first time we have seen a negative skew towards spending, 30% of our survey respondents do not allocate any budget to the Twitter platform, up from 25% in February”, Mahaney said, adding that “[w]hen ranked against its peers, Twitter ranked fifth of seven in terms of [return on investment] ROI to advertisers, behind Google, Facebook, YouTube and LinkedIn, but ahead of Yahoo and AOL.”
Most alarming for Twitter, besides concerns about user growth and engagement, is the fact this is a company-specific problem and not an industry one. Respondents indicated that “online avenues continue to rise in importance as marketing channels.”
Mahaney was also on CNBC’s “Squawk Box” this morning where he said he views Twitter as the most “disappointing” large cap name in the Internet space.
He added not to expect the platform’s second Thursday NFL live stream tonight to “move the needle” for the struggling company.
This downgrade is significant because not only is it another negative mark in the the social network’s red column, the analyst also refers to the firm’s advertising numbers as “the worst he’s ever seen…”. If Twitter can not expand its advertising base then its revenue growth prospects will continue to suffer.
Shares in the $13.26 billion market cap company gained 0.7 percent on Thursday in regular trading hours to close at $18.22. They’re now down 33.37% on a year-over-year basis and off about 43% from their $31.87 52-week high.
As news of the downgrade made its rounds, Twitter shares fell nearly 3 percent. Approximately 16 million shares changed hands, in regular trading compared to the stock’s average daily volume of 24.46 million shares.
On valuation-measures, shares of Twitter, Inc. have a forward price-to-earnings of 32.12. P/E to growth ratio is 0.93, while t-12 profit margin is (16.51%). EPS registers at ($0.60). The company has a new median Street price target of $14 with a high target of $23. Currently there are 7 analysts that rate TWTR a ‘Buy’, 26 rate it a ‘Hold’. Four analysts rate it a ‘Sell’.
On trading-measure, TWTR has a short float of 51.1 million. In the past 52 weeks, the stock of the micro-blogging platform has traded between a low of $13.73 and a high of $31.87, with a 50-day moving average [MA] and 200-day MA located at $18.83 and $16.90 levels, respectively.
TWTR currently prints a year-to-date loss of around 20 percent.