'Can't fly with broken wings' -- Wall Street blasts Twitter for missing Q4 earnings

Jack Dorsey AP ImagesTwitter CEO Jack Dorsey.

“Can’t Fly With Broken Wings.”

“Still Awaiting New Flight Plan.”

“Delayed Flight.”

“No Relief In Sight.”

“#Crash&Burn.”

Those are a few examples of analyst notes on Twitter since the company missed expectations for its fourth-quarter earnings.

Twitter reported $717 million versus estimates of $740 million, and only netted 2 million additional monthly active users during the quarter. Shares of Twitter immediately plunged nearly 11% in premarket trading on Thursday.

In light of Twitter’s missed expectations and warning that revenue growth would continue to fall behind its audience growth, around 20 analysts have either lowered their price targets or downgraded their ratings as of Friday morning.

“In the past, we have made the argument that Twitter would need “two wings” to succeed (user growth/engagement & robust ad $s),” said UBS analyst Eric Sheridan in a note distributed to clients Friday that downgraded his rating from neutral to sell.

“In light of its Q4 earnings report (and management’s initial take on ’17), we see Twitter as struggling to increase a mix of user time & mainstream adoption (despite being at the forefront of many real-time global events) and needing to re-position its ad business around a smaller cohort of ad products (driven by video) in the face of hyper-competition for branded ad $s targeted at digital video by Google, Facebook/Instagram, etc.”

“We believe Twitter is losing share to larger, faster growing, more video-centric properties,” said SunTrust’s Rodney Hull, who maintained his hold rating and lowered his price target from $18 to $16. “In addition, context, format and tools are also key factors for success and we believe Twitter is making investments to improve in these areas but it will take time to gauge the efficacy of these efforts.”

Mizuho’s Neil Doshi maintained his underperform rating and lowered his price target from $15 to $12 because “we see significant structural and competitive headwinds impacting the business.”

“We remain concerned about the core business, and Twitter’s ability to gain advertising budget share in the face of intense competition from other platforms,” he said in a note to clients.

RBC Capital’s Mark Mahaney also maintained his underperform rating, and lowered his price target from $14 to $12 in light of “sharply deteriorating” revenue and Twitter “undergoing a significant restructuring while seeing increased competition” for ad dollars.

Susquehanna analyst Shyam Patil said Snapchat is becoming another threat on top of the heightened competition Twitter already faces from Facebook and Google for ad budgets.

“We remain concerned about long-term user trends and engagement, and near-term monetisation and competition (Snap/Instagram),” he said in a note Friday. “Share losses are getting worse and, as we have commented before, we believe will get even more dire in 2017 as brands reset and re-evaluate budget allocations. Our worries about Snapchat taking incremental share seem to be materialising, and TWTR’s additional mid-Jan woes coincide with Snap opening up its API more broadly; meanwhile, we believe FB and IG continue to take share as well.”

Screen Shot 2017 02 10 at 11.01.27 AMMarkets InsiderTwitter’s one-week stock price history.

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