Twitter Falls After Analysts Downgrade Stock on Slow Growth View

  • Acquisition seen inevitable though not likely anytime soon
  • Twitter announces deal with CBS News for 2016 conventions

Twitter Inc. slipped after analysts at two firms downgraded the stock, citing a lack of confidence in the company’s direction and ability to capitalize on new products.

"What is Twitter? Quite frankly, we don’t believe that question has been answered," said James Cakmak, an analyst at Monness, Crespi, Hardt & Co. in a note. "Barring any changes, Twitter was, is and will continue as a niche product." He downgraded the stock to the equivalent of hold from buy.

Robert Peck, an analyst at SunTrust Robinson Humphrey also lowered his rating on the stock to the equivalent of hold from buy. “User growth and engagement for Twitter continue to be challenged, and we believe that increasing monetization can only go so far with limited new product introductions increasing competition (Snapchat!) and a challenging advertising background,” Peck said in a note.

Twitter has been struggling to broaden its appeal beyond journalists, politicians and celebrities using the site for self-promotion. It’s betting heavily on live-streaming as a way to make its platform a go-to place to react to and discuss current events. An agreement to broadcast National Football League games had higher-than-expected demand for advertising, spurring Twitter to seek more such deals. On Monday, the company announced an agreement with CBS News to live-stream the Republican National Convention from Cleveland next week and the Democratic National Convention in Philadelphia the week after.

Still, Twitter faces a formidable competitor in Facebook Inc. which is also making a big push into live video.

The stock fell 2.6 percent to $17.61 at 10:16 a.m. in New York. The shares have declined about 50 percent over the past year, valuing the company at about $12.4 billion. Many analysts see the company as an inevitable takeover target some day, though not anytime soon.

“It’s surely an upside risk to our new rating, but at this time we expect Twitter will have to navigate as a standalone company,” Cakmak said.

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