Twitter's Macro Commentary Is The Real Worry (Especially After Yahoo's Comments)

The news just keeps getting worse for Twitter Inc TWTR shareholders after the battered stock crashed another 15 percent on disappointing Q1 earnings. Twitter’s numbers were actually atypical this quarter, with the company reporting better-than-expected monthly active user (MAU) numbers and disappointing revenue.

However, according to Pacific Crest analyst Evan Wilson, Twitter management’s commentary on the weak environment for tech ad spending could be most troubling. Twitter seems to be echoing similar macro concerns to the ones that Yahoo! Inc. YHOO expressed in its post-earnings commentary.

“This very well may be the weak performers in the space pointing fingers, but we were watching for the potential impact on the end of VC welfare on ad spending,” Wilson explained.

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Twitter reports that ad engagements climbed 208 percent year-over-year (Y/Y) in Q1 and that cost per engagement was down 56 percent.

Twitter failed to deliver any significant improvement in its slumping user growth in Q1.

Pacific Crest has lowered its 2016 revenue and EBITDA estimates from $2.97 billion/$796 million to $2.66 billion/$689 million.

The firm maintains a Sector Weight rating on Twitter, but Wilson noted that the stock will likely spike at some point down the road on buyout speculation.

For now, Pacific Crest instead prefers Alphabet Inc GOOGL GOOG or buying any dips in LinkedIn Corp LNKD.

At time of writing, Twitter was down 15.55 percent on the day, trading at $14.99.

Disclosure: The author holds no position in the stocks mentioned.