Evercore ISI Downgraded Twitter Stock To Hold And Slashed FY16 Estimates

Evercore ISI adjusted the rating for Twitter stock and slashed some estimates for FY16.

On Thursday, Evercore ISI issued a report for investors covering stock of Twitter Inc. Ken Sena an analyst at Evercore has adjusted the price target and rating for the company on the basis of reduced belief. The analyst dropped the stock from Buy to Hold and cut the price objective from $49 to $39.

In the issued report, the analysts stated, "Twitter’s management has been clear that targeting, creative and measurement are three areas where their business stands to improve, speaking specifically to its Direct Response efforts, but we believe this to be true for the platform more broadly.”

Furthermore, the analysts believe that Twitter user growth has gone down over time. The research company does not hold the similar perception for the social media company like before. Ken Sena once believed that Twitter under monetizes on the basis of its influence. Currently, the research firm holds a conservative approach towards the company’s valuation about its long term growth prospects.

The adjusted target price of $39 is created on earnings of 27x per share estimate for fiscal year ’17 by the research firm. Evercore ISI is projecting a revenue share of 15% from company SBE in fiscal year 2017, while adjusted income will come at 22%. Furthermore, Twitter stock is most likely to trade as per 90x adjusted earnings forecast for fiscal year’17.

In the research report, Evercore analyst also cut the fiscal year 2016 revenue estimate to almost $3.3 billion, which is 50% down on year over year basis but in line according to the Street analysts revenue estimate. The revenue estimates shows $9 of average revenue each share, which is lower than the estimation of $14 for Facebook by Street analysts. Moreover, the research company slashed its EBITDA estimate for FY16 to $15, which is down 15% compared to previous estimation.

However, Evercore has reiterated its second quarter FY15 estimates.  The analysts mentioned in the report that the reason of not changing the 2QFY15 estimate was because they were already decreased during the company’s Q1 for FY15 financial results, resulting in missing the Street analysts’ consensus revenue estimate.

According to reports by Bloomberg, majority of analysts covering the stock of social media network holds Neutral outlook. Out of thirty nine analysts, 14 gave a Buy and 25 assigned a Hold rating to the stock of company. The Twelve month price objective suggested by the Street is $47.83, showing a upside potential of 30.3% compared to closing price of Twitter on June 4.