Stifel Cuts Twitter To Sell, Compares 'Too Soon Fad' To AOL, Groupon, Yahoo And Zynga

• Twitter Inc TWTR shares have been trending lower since April 2015, and are down 23 percent since January 4, 2016.
• Stifel’s Scott W. Devitt downgraded the rating for the company from Hold to Sell, with a price target of $14.
• Twitter will find it difficult to achieve its near and long term financial goals given its current user trajectory, Devitt stated.

Analyst Scott Devitt mentioned that Twitter has not been able to fully develop into a “sustainable public company” due to its poor strategy and execution. He pointed out that although Twitter ended 3Q15 with 320 monthly active users [MAUs], Yahoo! Inc YHOO has 1 billion MAUs across its network and has a much lower implied market value for its business.

Before being acquired by Verizon Communications Inc. VZ, AOL, Inc AOL had disclosed 200 million unique visitors. “If Twitter is in the early stages of following a similar path to ex-growth as AOL and Yahoo! experienced before it, as seems to be the case, then there is likely more downside for TWTR common stock,” Devitt wrote.

Some other internet companies like Groupon Inc GRPN and Zynga Inc ZNGA “quickly rose to prominence” after a sharp decline in their share prices. While these companies are not at the same scale as Twitter, both still have about 50mm users and “once had many more,” the Stifel report noted.

The analyst expressed concern regarding the continued slowdown in Twitter’s monthly active user growth and expects the same to turn negative in 2016 due to lack of product innovation. He added that the company’s 320 million users do not support the thesis that there is value in Twitter’s shares if the business is about to enter ex-growth territory.