TWTR

Publicly traded companies mentioned herein: Alphabet Inc (GOOGL), AT&T Inc (T), Disney (DIS), Facebook Inc (FB), Fox (FOXA), LinkedIn (LNKD), Microsoft Corporation (MSFT), Time Warner Cable (), Twitter Inc (TWTR), Verizon Communications Inc (VZ)

Highlights

The presenter is bearish on the outlook for Twitter (TWTR) shares and is short the stock after the recent rebound from the $14 - $15 range. He attributed recent gains to M&A speculation that is unlikely to play out, in his opinion, but Microsoft’s bid for LinkedIn nevertheless prompted short covering. The $17 - $18 range represents an attractive entry point on the short side because engagement has stopped growing and advertisers are moving their spend away from the platform. Newer/ alternative platforms (i.e., Instagram, Pinterest, Snapchat) with better user bases are growing faster and attracting ad dollars at TWTR’s expense. Fundamentally, TWTR’s daily active user (DAU) count is meaningfully lower than Facebook’s, and far smaller players - in terms of monthly active user (MAU) base - such as Snapchat and Facebook’s other apps have recently passed Twitter on a DAU basis as well. It is difficult for him to see either 1) why an acquirer would risk dilution, or 2) how revenue can grow meaningfully under these circumstances; he is forecasting “maybe” 10% growth next year in a best case scenario. By comparison, the Street is still modeling >20% growth. If the presenter’s assessment of the situation proves to be accurate and no offer(s) materialize, Street numbers will have to come down and the stock is likely to decline to ~$10 over the next 12 - 18 months.