SAN FRANCISCO — Twitter shares fell 2% in after-hours trading on the heels of an analyst warning that its value for advertisers may be "waning."
RBC Capital analyst Mark Mahaney downgraded the stock to "underperform," or sell rating, and lowered the price target to $14 from $17, citing a recent advertising survey with Advertising Age that found that 28% of the 1,100 advertising professionals surveyed planned to decrease their ad spend while 26% planned to "significantly" or "modestly" increase it.
"This is the weakest result we have seen and the first time we have seen a negative skew towards spending," Mahaney wrote in a research report.
Thirty percent of survey respondents do not allocate any budget to Twitter, up from 25% in February, the survey found. The percentage of those who commit between 1% and 10% of their online marketing budget to Twitter declined to 54% from 57%.
"Only 24% of respondents believe their (return on investment) has improved on the platform versus 21% who think it declined (a negative move from the 29% vs. 21% split seen earlier this year)," Mahaney wrote. "When ranked against its peers, Twitter ranked fifth of seven in terms of ROI to advertisers, behind Google, Facebook, YouTube and LinkedIn, but ahead of Yahoo and AOL."
Mahaney says the last four surveys don't offer "convincing evidence that a substantial number of advertisers will commit meaningful (dollars) to Twitter."
"Twitter believes it can command premium ad pricing, but its dramatic ad revenue deceleration doesn’t support that," he wrote. "That said, we could become more positive on Twitter if it shows meaningful traction with advertisers."