Twitter (TWTR): Poised to Fly High Or Time for Last Rites?

By Carrie Williams

Twitter, where it's headed?Twitter Inc (NYSE: TWTR) seems to be taking a lot of heat lately. The workforce layoffs, takeover rumors, better-than-feared 3Q16 results, presidential campaign, speculations about CEO, monetization challenges, and sales force restructuring are just a few things happening in tandem at TWTR right now.

With such broad array of news, some of which good, some others bad, most analysts have taken a wait-and-watch approach regarding the future and fate of TWTR. However, analysts at Cantor Fitzgerald consider TWTR to be heading towards better tomorrows and just recently even raised their price target from $18 to $20 for the stock while maintaining their Hold rating. Twitter stock is currently trading at $17.66, which is barely above its 200-day moving average of $17.36.

Cantor Fitzgerald analysts, led by Youssef Squali, believe that although there was no announcement about Q4 guidance and buyouts, the existing product tweaks, resizing of cost structure by management for better efficiency, and live streaming strategy of TWTR has been driving improved daily usage/ engagement. The 3Q16 results had beat the street estimates, reporting a revenue of $615.9M vs $603.8M (anticipated) and 21% higher EBITDA than estimates.

The trio of Twitter products, Twitter, Vine, and Periscope Producer had varying degrees of successes among users. The periscope was one of the most popular live streaming apps among users due to its simplicity and functionality. However, despite the huge buzz created by the live streaming of U.S presidential debate via Periscope, TWTR could not capitalize on that and turn it into user growth and consequently set the cash registers ringing. Recently launched Facebook Live is also fast becoming a challenge to Periscope, although the odds seem to be still favoring TWTR.

On the other hand, TWTR has announced that it would discontinue its popular video-sharing mobile app Vine. Vine, it seems, would be a casualty of the decision to layoff ~9% of the workforce due to restructuring/RIF intended to spark higher levels of growth as well as refining of core products. One of the biggest challenges faced by Twitter was its disappointing ad revenue growth as well as user growth. The new plans from management are intended to address these issues and aim to drive toward GAAP profitability in 2017 and LT EBITDA margins of 40-45%.

Meanwhile, the pressure is on for Jack Dorsey to make a decision whether he would like to remain as CEO of Twitter or Square, and soon. Overall, the future of Twitter seems to rest largely on how the company’s sales reorganization in 4Q and the future addition of more live content intended to spur engagement would pan out. This could potentially turn out to be a make or break deal for Twitter as it has already been on life support for longer than the company cares to recount.

At the moment the overall analysts’ consensus on TWTR is a Hold, based on analyst ratings in the last three months as provided by Analysts’ average target price on the stock is $17.75 for the next 12 months, which is a slight upside from the current levels.