Twitter Inc (NYSE:TWTR) is doing the right thing by cutting costs, turning its business into a sustainable enterprise instead of a bottomless money pit. However, even with real profitability on the horizon, the stock price bakes in far too much optimism. At least, according to RBC’s top analyst Mark Mahaney.
Mahaney in a research note to clients Monday, reiterated an Underperform rating on TWTR, with a price target of $18, which implies a downside of 28% from current levels.
Mahaney wrote, “In December, we conducted a survey of nearly 5,000 U.S. Internet users aged 13 to seniors to gauge the pulse of Social Media (“SM”) usage, with a specific focus on Facebook, Twitter, Instagram, and Snapchat. On the whole, Twitter had some of the least positive takeaways from our survey. The platform tested as the second least popular service overall (ahead of Snapchat), particularly among younger cohorts – though we did observe an intention for this group to increase their engagement. Further, the satisfaction levels were the lowest of the Big Four platforms, and, while still positive, showed similar levels to our last two surveys 2) Traffic Trends: We saw very positive comScore traffic trends for Twitter in Q4:17. Multi-Platform Unique Visitors increased 45% Y/Y in Q4 QTD, improving materially from 3% growth in Q3 though on a 2-pt easier comp. According to comScore, due to new forms of non-user initiated activity, iPhone reporting for Twitter was inflated from April 2017 to September 2017 and in turn impacted Multi-Platform reporting.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Mark Mahaney has a yearly average return of 22.8% and a 68% success rate. Mahaney has a -23.5% average return when recommending TWTR, and is ranked #28 out of 4745 analysts.
Overall, Wall Street is not convinced that Twitter is worth all the risk, especially when taking note that TipRanks analytics exhibit TWTR as a Hold. Based on 20 analysts polled in the last 3 months, 6 rate a Buy on Twitter stock, 11 rate it a Hold, while 3 issue a Sell on the stock. The 12-month average price target stands at $23.07, marking a nearly 8% downside from where the stock is currently trading.