Twitter‘s (NYSE:TWTR) stock share price fell 5 percent to $28.50 in early trading Monday after MoffettNathanson’s Michael Nathanson reiterated the microblogging service a “sell” and reduced his price target to $21 from $23.
The analyst, whose new TWTR 12-month price target implies a more than 36% nosedive from Monday’s $28.86 close, cited company forward-operating-expense concerns which for the first two quarters of 2018 were reported at 0 percent and 3 percent, respectively.
“For a business locked in competition with industry giants and under siege from regulators, reported operating expense growth has been amazingly low,” wrote Nathanson. The analyst noted, however, that after digging into Twitter’s most recent Securities and Exchange Commission 10-Q filings, he and his firm “would argue that the true underlying cost growth has actually been materially higher in the range of 13 percent to 15 percent.”
What’s more, the Twitter bear doesn’t see costs retreating anytime soon. In fact, he believes expenses are going to increase into the back-half of the year and in 2019 given the company’s “dire need to improve platform safety and invest in more video content.”
Nathanson also argues that consensus margin expectations will likely be revised down in FY2019.
Twitter Stock Price Action
Twitter shares are now down 39.6% from their highs of $47.79 in June. Despite the slump, the name remains 62% higher year-over-year through Monday, far outpacing the 16.2% gain of the S&P 500.
Of the 27 analysts who cover Twitter stock, 7 have ‘Strong Buy’ ratings, 18 have ‘Hold’ ratings, 1 has ‘Underperform’ rating and 1 has ‘Sell’ rating.
Ticker currently trades at 37x forward 12-month EPS estimates. Trailing-12 P/E prints around 94x.