Barclays Downgrades Twitter Post Q1 Results, Says Outlook 'Disappoints'

In a report published Wednesday, Barclays analyst Paul Vogel downgraded shares of Twitter Inc TWTR to Equal Weight from Overweight with a price target slashed to $44 from a previous $60 after the company's first quarter results that fell short of expectations and a "disappointing" second quarter guidance. "We are struggling to find any silver linings in the results as monthly active user growth met expectations while total revenue, advertising revenue and EBITDA all missed forecasts and were guided below Street expectations for Q2," Vogel wrote. "The company not only missed our numbers, but the distribution between advertising and licensing was skewed in the wrong direction to us." Vogel noted that Twitter ended 2014 with 111 percent revenue growth and exited the final quarter last year with a 97 percent year over revenue growth. In the first quarter 2015, Twitter's revenue growth "slipped" to 74 percent (80 percent ex-currency) with the midpoint of guidance for the second quarter in the low-50 percent range. The analyst stated that he was "surprised" with the rate of deceleration and was expecting at least 70 percent growth for 2015. In fact, Twitter's entire second quarter revenue is now expected to be in line with Vogel's prior Advertising only forecast (excluding $60 to $70 million licensing and other). Bottom line, Vogel argued that it is "hard to stomach the volatility without a clearer path" as investors may now be questioning Twitter's long-term future. The analyst suggested that it is prudent to move to the sidelines to wait for better clarity on the long-term opportunity at Twitter and higher conviction in "robust" revenue growth.