Twitter Inc’s race against the clock is intensifying. The company is trying hard to improve its much-criticized interface, but analysts said the challenge was to do that before more users and advertisers defect to Facebook Inc and Alphabet Inc’s Google.
Twitter, led by co-founder Jack Dorsey, said on Tuesday monthly active users ticked up to 310 million in the March quarter, but revenue fell short of expectations.
The company’s shares were down 15 percent at $15.14 in premarket trading on Wednesday. They traded as high as $52.54 about a year ago.
Analysts said Twitter had some good products lined up, but benefits from those products might come in too late.
“It needs to prove that it can fix its product issues before users leave and go to other networks for good,” Macquarie analyst Ben Schachter said in a note.
The outlook does not look good either. The San Francisco, California-based company forecast second-quarter revenue widely below Wall Street expectations.
Of the 18 analysts covering Twitter, at least 16 cut their price targets. Pivotal Research was the most bearish, slashing its target to $27 from $39. JP Morgan also lowered its rating to “neutral” from “overweight”.
The median price target on Twitter is $18.
Only two brokerages remained slightly bullish – Goldman Sachs and Mizuho Securities raised their price targets.
Mizuho analysts said some products could drive growth later this year or in early 2017, while Goldman analysts said there was “significant value in Twitter’s user base, content … that a stable management team and focus on product should be able to unlock.”
TOO LITTLE, TOO LATE?
The company’s stock has lost about two-thirds of its value over the past year, but is still much more expensive than most of its peers.
Twitter has improved the way tweets appear even when a user is not logged in and tweaked timelines so that some tweets are prioritized over others. It has also signed a content streaming deal with the National Football League that could help the social media site expand its user base.
Twitter has been promoting video ads and the company said on Tuesday that its users were spending more time watching and sharing video, but added that advertisers’ budgets had not yet shifted from legacy advertising products such as promoted tweets.
“… the shift from legacy promoted tweets to higher performance ads led to cannibalization of budgets,” Canaccord Genuity’s Michael Graham said.
“We think this could be a risk for the next quarter or two, adding to the depth of the operating trough we already expected until product improvements can drive sustained MAU growth.”