SunTrust's Bob Peck Sees Twitter Turnaround Potentially Taking A 'Considerable Time'

In a report published Wednesday, SunTrust Robinson Humphrey analyst Robert (Bob) Peck discussed why he is convinced Twitter Inc TWTR's turnaround may take a "considerable time." According to Peck, the general tone coming out of Twitter's post earnings conference call was one of warning and caution. The management team made it clear that its turnaround initiatives could take considerable time, even though its second quarter print were largely inline on user metrics with a beat on revenue and EBITDA. Peck continued that Twitter is now labeled as a "prove it" story as execution on product rollouts and successes and improving its monthly active user (MAU) base will "remain paramount." Meanwhile, the analyst noted that a "key investor question" concerning a permanent CEO remains a question mark as the company's interim CEO Jack Dorsey "did not provide any color." Moving on to the more than 10 percent plunge in Twitter's stock following the company's conference call, Peck noted the decline occurred for four reasons: 1) Twitter's CFO "underscored" the fact that a turnaround in user growth would take "considerable time" as U.S. MAUs were flat; 2) daily active user (DAU) to MAU ratio declined to 44 percent from 48 percent; 3) third quarter topline and EBITDA guidance fell short of expectations; and 4) Twitter showed a lower ad demand relative to supply. Bottom line, Peck remains "cautiously optimistic" on Twitter in the long term as the company could benefit over time from logged out user opportunities, new products, its already existing partnership with Google Inc GOOG GOOGL, better targeting initiatives, and the potential to improve mass market penetration. Shares remain Neutral rated with a price target lowered to $38 from a previous $40.