Skeptical Of M&A Rumors, Mizuho Downgrades Twitter

Twitter Inc TWTR shares have rallied 45 percent since its Q2 earnings release, driven primarily by M&A speculation.

Mizuho’s Neil A. Doshi downgraded the rating on the company from Neutral to Underperform, with a price target of $15.

“We are skeptical of these potential business combinations and believe that the stock is overvalued as business fundamentals have deteriorated significantly over the past 12 months,” Doshi mentioned.

Related Link: Here Is Every Twitter Takeover Rumor Of 2016

The analyst believes M&A speculation is unlikely to play out and that the stock has become too expensive due to these rumors, especially for a company that is delivering revenue growth a third of the level seen a year ago and growing more slowly than many of its peers.

“Some may point to LinkedIn Corp LNKD as a comp, but LinkedIn has a larger member base that is growing faster, has deep moats around its core recruiting business, and has shown solid diversification into advertising and other businesses,” Doshi noted.

Fundamentals Deteriorating

In fact, the analyst pointed out that Twitter’s core fundamentals are continuing to deteriorate, with U.S. ad revenue growth at 18 percent year-on-year for Q2, well below its peers.

In addition, the company’s global MAU has grown only 3 percent over the last two quarter, again well below that of its peers.

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