The narrative is far more damning than suggested by analyst Michael Pachter’s ‘neutral’ rating, which comes with a US$14 per share target price (current price US$18).
Pachter acknowledges that Twitter is “the place to go” for live broadcast - a point underlined by Twitter’s successful recent NFL Thursday Night Football project – but he says management is too ‘unfocussed and complacent’.
“Until Twitter is focused on attracting new users, driving increased use by its existing users, and demonstrating its value proposition to people who don't use the service, we expect it to grow very slowly," he said.
“We think that its service is too complicated and difficult to use for the average Internet user despite multiple changes.
“In our view, there is no clear-cut potential buyer for Twitter.”
Pachter says that takeover speculation has been the main support for Twitter’s share price, yet high profile potential acquirers have walked away.
“As Twitter generates only limited free cash flow, has a bloated cost structure and limited growth trajectory, we continue to see a takeover in the near term as exceedingly unlikely.”
That said, Wedbush expects Twitter to report third quarter revenue at the high end of guidance when it releases its figures later this week – noting that activity on the platform has been driven by the US presidential election, live event streaming and video.
It estimates US$610mln of third quarter revenue, with US$150mln of earnings.
“Our top-line estimate contemplates year-on-year growth of 7%, below last quarter's 20% and significantly below the levels seen in every quarter of 2015,” the analyst added.
Twitter is due to release its results for the third quarter on Thursday, after the market close.