Twitter Inc (NYSE:TWTR) Downgraded on Ad Growth Concerns

Twitter Inc (NYSE:TWTR) Downgraded on Ad Growth Concerns

Twitter Inc (NYSE:TWTR) was downgraded by UBS analyst Eric Sheridan to neutral from buy.

Sheridan is concerned about declining ad revenue estimates and stalled growth of monthly average users. The analyst also lowered his price target on TSLA to 18 from 22. The stock is currently trading around $17. Shares of the social media company were 1.68% down in the after-hours trading session.

“We believe Twitter’s ad revenue will likely be pressured (and grow below industry levels of mid-teens CAGR [compound annual growth rate] the next three years) given lackluster advertiser demand (among heightened competition), executive turnovers and challenged ad execution,” Sheridan wrote in his note, CNBC reported.

Sheridan noted that Twitter killed several direct-response advertising products and services over the last few months, “which we believe could dampen Twitter’s ad budget growth with direct response advertisers,” Investor’s Business Daily reported.

The struggling social network will report fourth-quarter earnings early next month. According to the Wall Street consensus estimate, the company is expected to post revenue of $740.1 million, down 4% year-over-year. Earnings per share is expected to fall 25% to 12 cents.

Meanwhile, RBC Capital’s Mark Mahaney believes that Twitter will see a decline in revenue in 2017. He said that there is a greater than 30% chance that the company’s revenue will drop this year.

Previously, Tae Kim’s CNBC said in a report that the company needs to consider an ad-free paid subscription service this year. This subscription service could not only allow the top users to make money but could attract more users to the company’s microblogging site.

Twitter is betting big on live video streaming in a bid to attract more users to its platform. The company is looking to stream entertainment and sports as well as political events.

“From concerts, news shows, sports and other live events, the company has a large growth opportunity to be the leading live mobile video distribution platform. Highly-targeted video ads during the streams should also become increasingly valuable to marketers,” Kim wrote in the report about the company’s growth ideas.