Investors 'Universally' Negative On Twitter, But SunTrust Still Likes The Stock Long-Term

• Twitter Inc TWTR shares are down 50 percent in the last six months, and are trading substantially below their 52-week high of $53.49.
• SunTrust Robinson Humphrey’s Robert S. Peck maintained a Buy rating for the company, while reducing the price target from $34 to $26.
• While Twitter is an interesting long-term opportunity for investors, executive turnover could indicate near-term concerns, Peck stated.

According to recent media reports, executives Katie Stanton, Kevin Weill and Alex Roetter may be exiting Twitter. The reports also cited an impending announcement of a new CMO and two new board directors. Analyst Robert Peck pointed out, “Should these executives leave, that would be ~66% of the original executives that presented to investors at the Analyst Day.”

The recent executive turnover could be indicative of product and media concerns in the short term, Peck said. He added, however, that although there are near-term challenges at Twitter, expectations had been reduced and appear “reasonable.” Moreover, Twitter presents an interesting long-term opportunity for investors.

Investor sentiment towards Twitter was low, the analyst mentioned, while adding, “Investors we speak with are almost universally negative on Twitter and its prospects.”

Twitter is expected to report its 4Q revenues broadly in-line at $705M, with EBITDA of $170M. “We saw evidence of increased direct response advertising later in 4Q which we believe supports our call, though competition for social ad dollars is increasing,” the SunTrust report noted.

The revenue and EBITDA estimates for 2016 have been reduced from $3.15B to $3.13B and from $806M to $800M, respectively. The lowering of the price target reflects “a re-rating of multiples by the market,” Peck stated.