Twitter Inc has received a number of bearish views from Wall Street analysts in recent months. The stock has been seeing a decline in its share price for much of the last year as Wall Street worries about its user base growth. Many analysts have lost faith in Twitter. Earlier this week the stock got a Neutral rating and a target price of $29 from MKM Partners. That’s 45% lower than its 52-week high of $53.49.
Despite all the negatives, some analysts, like Sanderson of MKM, believe that the stock has the potential to be worth $100 per share. This price target is depends on the ability of the board to make the right choices in the coming months. The 3Q2015 reflects on the new CEO’s, Jack Dorsey’s, performance after being placed in charge of Twitter some 3-months ago.
Is Twitter Worth $100?
As one of the more optimistic analysts on Wall Street Sanderson has classified Twitter as a “quadruple or nothing bet”. Rob Sanderson of MKM advised Twitter’s management team to simplify its user experience, in order to attract the mass market. He added that if the website decides to go mainstream it could help the company improve its market cap by four fold.
Yet, it will be a while before Wall Street can take a definite stand on Twitter because the firm has some changes in the pipeline. For now, all eyes are on Twitter Inc ’s latest “Moments” feature, which analysts hope will provide a firm path forward for the company. However, this feature is new; hence, the user response data is yet to yield any decent results.
Twitter must grow or die
Even though in its 3Q2015 report Twitter was able to beat analyst expectations, it was only by very small margin. Zacks had expected the company to report a loss of 25-cents per share and revenues of $558.8 million. In comparison, the report revealed a loss of 15-cents per share and revenues of $569.2 million. Twitter was only able to report a 1.3% growth in users in the third quarter. More so, a meager guidance for the 4Q2015 caused investors to lose interest in the firm.
Now, Twitter Inc is heavily relying on off-network ads to increase its revenues. Yet, Dorsey seems have taken Rob’s advice, he revealed that the company is now focusing on three things: a disciplined execution, simplified services and value communication.
More so, the micro-blogging site needs to work on attracting more celebrities or influencers as they are called. People tend to follow such influencers and stay up-to-date with what they do and have to say on social media. Unfortunately, the competition in that area is very strong from the rising popularity of Instagram.
Mr. Sanderson’s encapsulation of Twitter’s problems is fairly clear cut, though it doesn’t really give much to those thinking about buying shares in the firm. Twitter stock is either worth $10 or $100. Only the very brave are going to be able to bet one way or another.