Buyer Beware: Oppenheimer Downgrades Twitter, The 'Sixth-Best Social Media Platform'

Shares of Twitter Inc TWTR jumped 21 percent on Friday, following reports of the company nearing a sale. On Monday, Oppenheimer’s Jason Helfstein downgraded the rating on Twitter from Perform to Underperform, while establishing a $17 price target.

Helfstein commented that Twitter had “slowing user growth, poor product implementation/execution, decreasing user engagement, inferior advertising technology, platform safety issues, and strong competition.”

Helfstein believes the most probable acquirer would be a media company, and that the purchaser would likely not pay much more than the valuation implied by the current price target. He added, however, that the probability of Twitter’s sale was very low, especially given the lack of any meaningful increase in engagement due to the Olympics or the NFL games.

Related Link: Twitter's Dramatic Ad Revenue Deceleration Leads To RBC Downgrade

Comparison With Other Social Media Platforms

Twitter's Mobile App Unique Visitor growth significantly laps that of Snapchat and Pinterest. While Twitter's mobile app unique visitors grew 10 percent in August, Snapchat recorded 77 percent growth and Pinterest witnessed 32 percent growth, the analyst noted.

“We believe that Twitter's user interface is difficult to learn, dissuading users from joining. User safety issues have also taken a toll,” Helfstein commented.

Engagement on Twitter declined 9 percent year-over-year in August, and has been on a downtrend since January. While users spent 143 minutes per month on Twitter, users spent 266 minutes per month on Snapchat.

The analyst added that competitors were investing much more than Twitter on advertising technology. Snapchat has launched Snap Audience Match, while Pinterest has launched an improved version of Promoted Pins.

“We believe these investments will cause Twitter to lose share to these emerging platforms in 2017,” the analyst stated.

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