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This Is Why Morgan Stanley Says Sell Twitter

On Wednesday, growth-stunted social media company Twitter (TWTR) nabbed an attractive streaming deal with the National Football League—fighting off a list of other titans such as Facebook (FB), Yahoo (YHOO), and Amazon (AMZN) to win the rights to show 10 Thursday night football games worldwide.

For Twitter, the deals are a big opportunity for the ailing company to herd in new monthly active users—a key metric used by social media platforms and an area that Twitter has struggled to grow in past years.

But those streaming rights aren’t going to be enough to make Twitter an attractive buy, Morgan Stanley (MS) analysts wrote in a note Thursday. The analysts maintained an “underweight”—Wall Street’s nice way of saying, “Sell”—rating, and lowered the stock’s price target from $18 to $16. Shares of Twitter are trading at $16.78, down close to 3% in early trading Thursday.

“We see fewer users and less time per user holding back Twitter’s platform monetization,” a team of Morgan Stanley analysts lead by Brian Nowak wrote. “We believe Twitter’s core user engagement remains in decline, as time spent per U.S. mobile user fell by an estimated 10% (year over year in the first quarter of 2016).” The analysts also noted that Twitter’s time spent per user is “already among the lowest” of its rivals and it is “still in decline.”

The bank also slashed how much it thinks Twitter can grow in the future, saying the social media company would add 2.6 million monthly active users in 2016, a steep cut from previous estimates of 5.2 million. For 2017, Morgan Stanley said Twitter would register 300,000 new global monthly users, versus a previous estimate of 3.4 million.

That in turn cuts into Twitter’s ad revenue, which represented about 29% of total revenue in 2015. Morgan Stanley also lowered estimated 2016 revenue from $2.96 billion to $2.83 billion, and also slashed 2017 revenue to $3.23 billion, down from $3.43 billion.

That said, Morgan Stanley still noted that the streaming deal, alongside buzz regarding the Rio Summer Olympics and U.S. Presidential elections would be the main driver for active user growth in 2016, which means delivering the streaming deal and continued social media buzz around the latter two events will be essential for Twitter to hit even those lower monthly active user figures.

“An inability for these events to deliver would likely mean even more downside to our MAU estimates,” analysts wrote.

Even then however, Morgan Stanley has been “skeptical” about the user growth the NFL partnership could create for two main reasons: first, it’s hard to change consumer behavior and most NFL watchers still do so on TV, and second, Twitter streamers won’t be required to log in to watch the game—which might be user friendly, but doesn’t guarantee new user registrations.