Shares of Twitter (TWTR) - Get Twitter, Inc. Report were sinking over 1% in pre-market trading on Friday after investment firm Jefferies cut its rating on the beleaguered social media company's stock to "Hold" from Buy" with a $16 price target.
While Twitter's platform does carry "broad user engagement" monetization is weakening, Jefferies analyst Brent Thill noted. "In social we see a clear winner in [Facebook (FB) - Get Facebook, Inc. Class A Report ]."
"TWTR's push to be a digital live video provider is interesting, but we note that bigger competitors such as FB & [Alphabet (GOOGL) - Get Alphabet Inc. Class A Report ] have much stronger digital video propositions for advertisers with much larger and more engaged user bases, deeper granular data for targeting, and proven return on advertiser investment," Thill said.
Unfortunately for Twitter, not only are engagement improvements not translating into increased revenue, advertising revenues in the first half of the year sunk 6%, he added.
But, Tahill did not take the stock to a "Sell" because of improvements made the past two years.
"We believe recent management changes could help improve the declining [average revenue per user] in the near term," he said. "We will pay close attention to advertiser sentiment over coming months and effectiveness of live video."
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