Barclays Questions Twitter's Ability To Grow New Users

Twitter Inc (NYSE: TWTR) reported mixed results and announced lower-than-expected guidance. Barclays’ Paul Vogel maintained an Equal-Weight rating for the company, while reducing the price target from $19 to $18. The analyst commented that Twitter’s future continues to be “cloudy,” given concerns around a clear path to igniting interest from new users.

Twitter reported MAU growth of 3 percent to 310 million, marginally higher than the estimate. Analyst Paul Vogel mentioned, however, that the modest upside to MAU growth seemed insufficient to boost the stock. While revenue missed Street expectations, the company’s EBITDA came in at $180 million, up 73 percent. Twitter was able to beat EBITDA expectations on the back of cost controls.

Weak Guidance

Vogel expressed concern regarding Twitter’s ability to improve monetization, with the company’s revenue growth continuing to disappoint.

Twitter had recorded 80 percent and 68 percent revenue growth in 1Q15 and 2Q15, and the performance in 2016 is at 36 percent [reported for 1Q16] and 20 percent [implied by midpoint of 2Q16 guidance]. “While currency does play a limited role, this is a stark deceleration in such a short period of time,” the analyst wrote.

Future Cloudy

“From a product perspective, we see incremental improvement (Periscope, Thursday Night Football deal) as interesting but maybe not enough to move the needle,” Vogel said. He added that although Twitter gets unlimited free marketing form traditional media, its growth had decelerated steeply.

“We aren’t sure what they can do at this point to reignite interest from non users so monetization is going to have to come from non logged in, if possible,” the analyst added.