Oct 25, 2016 ยท 4 minutes

And so it comes down to this crazy November for Twitter.

It turns out (as we predicted) most of that tire-kicking to buy the company was mostly bluster, save Salesforce.com who seems to have been the only serious suitor. Who then decided, “nah….”

Even [Pando investor] Peter Thiel won’t touch it now: A rumor that he was interested in backing a bid for the blue bird seemed like it could be the Venn Diagram of Peter Thiel scandals. A platform that is the bastion of press freedom, that journalists use to bleat out how freaked out they are by Thiel’s crusade against Gawker and a platform that has enabled the bullying rise of Thiel’s Presidential candidate of choice Donald Trump all is one! But even that has been categorically denied.

Yesterday, Morgan Stanley has presaged that things are about to get even worse for Twitter. In a research report it predicts that Twitter will decline 5% year-over-year this quarter and decline a further 1% in the fourth quarter, below Wall Street’s consensus. As a result, Morgan argues a 15x EBITDA multiple makes little sense. It’s predicting that Twitter could experience enough multiple compression as a result of softening revenues to “join other struggling assets like Yahoo with a single digit [multiples].”

Twitter’s 52-week range has been as high as $31 and as low as $13.73. It’s currently trading at $17.32. Morgan Stanley’s price target is lower than any of those numbers: $13.25. Morgan even articulated a bear case where the stock gets down to just $7. Ouch.

From the report:

TWTR's Core Owned and Operated Ad Revenue to Slow to 3% Growth Even with the NFL: Our agency and advertiser conversations around TWTR's core owned and operated (O&O) ad business (making up ~90% of ad revenue) remain negative, with multiple parties now talking to "year-over-year declines" in total TWTR ad spend (compared to a deceleration and/or no growth earlier in the year). Marketers point to other platforms with greater reach, lower effective pricing and superior targeting (like FB) taking more budget share. The addition of the NFL Thursday Night Football streaming is the one positive being called out, but as detailed herein, we estimate that TWTR will generate a total of only ~$11mn in incremental ad revenue from the NFL in 4Q:16 (See Exhibit 4). This is included in our TWTR O&O ad forecast (expected to grow by ~3% Y/Y in 4Q:16). Excluding the NFL benefit, our estimates assume TWTR's O&O ad revenue grows ~1% in 4Q:16 (See Exhibit 5), which if anything could be overly optimistic given our negative industry conversations. 

“Even with the NFL”

It’s an important caveat that must sting Jack Dorsey & Co. The shtick coming into the summer was that the trifecta of the NFL, the Olympics and the election-- which has center stage on Twitter given its biggest troll is running-- would drive growth. Right? It had to. If it didn’t what else could?

Well, the Olympics are done, this month the election will be done, and it seems the NFL isn’t saving Twitter. That doesn’t leave Twitter in a good place.

We will see this later in the week when Twitter reports earnings.

Meantime, even Donald Trump smacked Twitter in the face this week: He launched -- let’s just say V1?-- of TrumpTV this week on FacebookLive. The man who has come to typify the bullying on Twitter that has limited its mainstream appeal and growth, can’t even be bothered to use Twitter for little more than 2 am insult-storms.

Meantime, Valley heavyweights and journalists keep pleading for someone-- anyone-- to rescue Twitter because it’s so necessary for the world. The pleas sound like those from a great, aging newspaper, whose best hope has become a Pierre Omidyar, Chris Hughes, or Jeff Bezos level billionaire swooping in to buy it for the “public good.”

The problem, again, is price. Plenty of rich folks in the Valley would love to “save” Twitter. But there’s the same problem that bankers are facing in selling the company: It’s just too damn expensive at a current $12 billion.

As we wrote last week, Twitter is both at its peak in terms of clear value to the world and distinction from other platforms and it’s nadar in terms of its promise as a public company. If nothing else, it should be a cautionary tale for all those unicorn companies hoping the steadying markets will let them go public at their current inflated prices. If your business and growth doesn’t support that price: You too could wind up in a Twitter trap even if you are mentioned on cable news every moment of every day and the world desperately wants you to exist.