The “Revolving Door” of Twitter Inc

SunTrust's Youssef Squali gives fair warning: the departure of COO Anthony Noto is no small "loss" for Twitter.

Twitter Inc (NYSE:TWTR) dropped 4% in value since Monday, with yesterday’s bomb that the recovering social media giant is losing its COO and former CFO Anthony Noto to SoFi.

Top analyst Youssef Squali at SunTrust says this is a bad blow for Twitter after the past two years have seen the company act essentially as “a revolving door,” ever since former CEO Dick Costello first walked out in 2015.

Make no mistake, says Squali- this is a “major loss for Twitter.”

Finding that the “COO’s departure raises questions about [the tech player’s] state of turnaround,” the analyst reiterates a Hold rating on TWTR stock with an $18 price target, which implies a 19% downside from current levels.

In a period that has seen so many exits from Twitter, the analyst is especially concerned that Noto had embraced more “responsibility within the company,” in charge of the company’s business and revenue-creating operations. The loss of Noto will not go unnoticed with Twitter CEO Jack Dorsey not just running this social media platform but also tech company Square. From the analyst’s cautious perspective, Twitter’s seemingly endless string of departures are “making it harder for the company to follow a well laid out long-term strategy.”

This COO had “been a strong addition to the Twitter team,” warns Squali, who pinpoints “improvements under Mr. Noto,” between the company’s new video strategy and the NFL deal that “helped [flesh] out the company’s video strategy back in 2016.” Even in terms of costs, Twitter had seen success in an operating expense reset, with capex reduced from a $350 million guide for 2017 to roughly $230 million, and SBC chopped from $615 million in 2016 to $426 million.

Overall, “We view this departure as a major loss for Twitter and possibly a negative read into the company’s on-going efforts to fix the platform and get it back on a growth trajectory. While our view of TWTR has improved on the margin following 3Q results, which showed better user and advertiser engagement, and higher cost containment, Mr. Noto’s departure keeps us neutral on the name given the thinning of the management’s ranks, especially with CEO Jack Dorsey running two publicly traded companies, and given challenging 4Q comps, lack of clarity around FY18 revenue growth and valuation, which has increased 32% since 3Q17 earnings,” Squali contends.

Youssef Squali has a very good TipRanks score with a 73% success rate and a high ranking of #59 out of 4,757 analysts. Squali garners 19.5% in his annual returns. However, when recommending TWTR, Squali forfeits 21.7% in average profits on the stock.

TipRanks suggests Squali is not the only one hedging his bets on the Street, with Wall Street split as a battle between the bulls and the bears on this social media stock. Based on 27 analysts polled in the last 3 months, 6 rate a Buy on Twitter stock, 16 maintain a Hold, while 5 are bearish on the stock. With a loss potential of 2%, the stock’s consensus target price stands at $21.86.

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