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Pro Analysis

Twitter downgraded by UBS on weak advertising revenue, negative behavior on site

Twitter signage at the New York Stock Exchange.
Scott Eells | Bloomberg | Getty Images
Twitter signage at the New York Stock Exchange.

UBS on Tuesday downgraded Twitter to neutral from buy, joining a growing number of Wall Street firms concerned about advertisers' dwindling interest in the social media platform.

"We believe Twitter's ad revenue will likely be pressured (and grow below industry levels of mid-teens CAGR [compound annual growth rate] the next three years) given lackluster advertiser demand (among heightened competition), executive turnovers and challenged ad execution," equity analyst Eric Sheridan wrote in a research note.

He believes those operating challenges may cause user growth to falter, further impacting Twitter's appeal to advertisers.

"Continued issues with user verification, bots and negative social behavior by users could cause any momentum to dampen," said Sheridan, referring to a short spike in user engagement during the U.S. presidential election.