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Morgan Stanley Paints Bleak Outlook for Twitter on Few New Users

Morgan Stanley analysts came down hard on Twitter Inc., lowering their forecasts for the social media company’s stock price, on projected slower growth in new users, revenue and earnings.

“Engagement and new user trends remain troubling,” the analysts, led by Brian Nowak, said in a note to clients Thursday.

Morgan Stanley cut its price target on Twitter to $16 from $18 and reduced its projection for 2017 earnings before interest, tax, depreciation and amortization by 13 percent to $769 million. The firm reduced its 2017 revenue forecast by 6 percent to to $3.23 billion.

Twitter has been struggling to attract users beyond its traditional base of journalists, politicians and celebrities and catch on with more mainstream members. In a step to remedy that, Twitter signed a deal to stream U.S. National Football League games, banking on success with the NFL to drive more video deals.

Morgan Stanley, which kept its underweight rating on the stock, said time spent per U.S. mobile user on Twitter fell by an estimated 10 percent in the first quarter of 2016 from a year earlier. New mobile app downloads were unchanged from the previous period for the second straight quarter, the note said.

Any net new users this year will be largely derived from benefits of the NFL deal, the U.S. presidential election and the Olympic games, according to the note, and an inability for these events to deliver may result in an additional reduction to user-add estimates.

“We see fewer users and less time per user holding back Twitter’s platform monetization -- putting a limit on ad impression growth and holding back the pace at which advertisers increase their share of ad budgets toward the (shrinking) platform,” the analysts wrote.

The shares were little changed at $17.33 at 10:57 a.m. in New York after shedding as much as 3.3 percent in early trading following the release of the report. The stock has declined 25 percent this year.

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