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Why Citi Sees More Reasons to Be Cautious About Twitter in 2020

Jon C. Ogg

Published: December 18, 2019 9:50 am

Last Updated: January 30, 2020 12:02 pm

Until September, Twitter Inc. (NYSE: TWTR) seemed to be doing incredibly well this year, but since peaking above $45 for a few days, its shares have lost close to one-third of their value. This might be considered par for the course, considering its hi-beta valuations and volatile nature, but this is also during a period when the broader stock market has surged to all-time highs day in and day out.

Citigroup has released a note on Wednesday urging a bit more caution ahead of 2020. Beyond the notion that @Jack is going to go take some time off and work around Africa, Citi is more concerned about near-term revenue growth.

The firm lowered its target price by 20%, down to $36.00 from $45.00. While that is still above the $30.70 share price ahead of the call, Citigroup’s rating is just Neutral. Hao Yan, the analyst covering Twitter, also lowered the company’s earnings target to $0.24 from $0.27 per share. That is down from the Factset consensus estimate of $0.29 per share.

One of the revenue concerns arises from the impact of mobile application promotion. Yan also expects Twitter to issue more clarity regarding that mobile application promotion, as well as 2020 guidance, with its fourth-quarter earnings, but that report is still six or seven weeks away.

Citi is not alone in its concerns. Evercore ISI downgraded Twitter in early November to Underperform from In-Line, and in October it was Goldman Sachs and Aegis Capital issuing downgrades to Neutral and Hold, respectively.

Shares of Twitter were last seen up not even 7% year to date, while the Dow Jones industrials and S&P 500 were up well over 20% and the Nasdaq was up over 30%. Its shares have fallen by 29% in the past quarter, and the consensus target price was already $34.41 ahead of this call.

After closing down 0.87% at $30.70 on Tuesday, Twitter’s share price was up about 0.7% at $30.94 early Wednesday morning.