Twitter's Stock Price Target Cut As Industry Challenges Remain Despite New CEO Hire

Twitter Inc.'s stock price target was cut by 23% to $40 by analyst Evan Wilson at Pacific Crest Securities on Tuesday, given concerns over industry challenges, but he kept his rating at overweight because he believes the naming of co-founder Jack Dorsey as its new CEO on Monday could boost investor sentiment over the near term. Twitter's stock slumped 1.3% in premarket trade, after climbing 7% on Monday. Wilson said that although he believed Twitter's best option for a CEO was an outsider, his analysis showed that the shares of seven of the eight technology companies covered by Pacific Crest that underwent lengthy CEO searches rose an average of 18% in the 90 days following the new hire. "The quality of the hire (and whether it was an internal or external hire) matters most, but the 'hope trade' is clear," Wilson wrote in a note to clients. He said he's "much less optimistic" about Twitter's success with direct advertisers, and is mixed about the opportunities for a fundamental turnaround, but he believes Dorsey is a good fit and the near-term lift to sentiment could give investors a free look at potential big changes. The stock has slumped 22% year to date, while the S&P 500 has slipped 3.5%.

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