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Analysts Drop Twitter Stock to Sell

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As problems at Twitter Inc. (NYSE: TWTR) deepen, more and more analysts have cut their ratings, to the point at which most recent ratings changes have be to Sell or Underperform. Those opinions may make it hard for the stock to recover from five-year lows, according to Yahoo! Finance.

Among the most recent analyst calls on Twitter, Bank of America cut the stock from Neutral to Sell. JPMorgan dropped its rating from Overweight to Neutral. And Stifel dropped its from Hold to Sell.

At least some of the 37 analysts who cover the social network company believe Twitter’s shares will recover modestly. Against shares that trade at $14.40, the low target price among these experts is $10, but the median target is $18.

Analysts are equally pessimistic about Twitter’s earnings and revenue. Per-share earnings are expected to rise from $0.07 to $0.10 in the current quarter. Worse, if it is possible, revenue will grow only 21% to $609 million from $502 million in the current quarter. While that kind of growth would be impressive for most companies, in the Web 2.0 world, it is extremely slow. The problem extends to analysts’ full-year forecast. Earnings are expected to increase to $0.69 per share from $0.52 a year ago. Revenue is expected to rise 21% to $3.3 billion. The comparison to the growth of rivals like Facebook Inc. (NASDAQ: FB) holds true again. If Twitter is not growing at a 50% clip, it is a disappointment.

Almost all the pessimism about Twitter is driven by the trend set last quarter, as well as concern that CEO Jack Dorsey has even the smallest chance to turn the company around.


In the quarter just announced, revenue rose 36% to $595 million, a rate well ahead of what analysts expect in the future. However, Twitter lost $80 million.

Analysts based many of their current forecasts on Twitter’s own outlook:

For Q2, we expect:

  • Revenue to be in the range of $590 to $610 million
  • Adjusted EBITDA to be in the range of $145 to $155 million
  • Stock-based compensation expense to be in the range of $165 to $175 million
  • GAAP share count to be in the range of 700 to 705 million shares
  • Non-GAAP share count to be in the range of 710 to 720 million shares

For FY 2016, we expect:

  • Capital expenditures to be $300 to $425 million
  • Adjusted EBITDA margin in the range of 25-27%

Twitter is headed in the direction in which every single analyst who covers the stock will rate it as Sell or its equivalent, and all price forecasts will be below where shares trade now.

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