MORGAN STANLEY: Now things look even worse for Twitter

Morgan Stanley analysts think Twitter is still struggling. A lot.

In a note Thursday, analyst Brian Nowak and team lowered their expectations for how high the company's shares can rise, how many users it can add, and how much it can earn from ads.

They lowered their price target to $16 per share from $18, and maintained an "Underweight" rating on the stock. The shares fell about 2.7% to $16.80 in pre-market trading.

From the note (emphasis theirs):

Engagement and New User Trends Remain Troubling... We believe TWTR's core user engagement remains in decline, as time spent per U.S. mobile user fell by an estimated 10% YoY in 1Q:16. This may be an improvement from the 30%+ YoY declines from last year, but stepping back, TWTR's time spent per user is already among the lowest in the social group ... and is still in decline. New user growth doesn't appear to be rebounding either, as quarter-over-quarter new mobile-app downloads were flat for the second straight quarter."

Twitter has been struggling to grow its number of monthly active users (MAU) and catch on as a mainstream platform.

Twitter's most recent earnings results showed it added 320 million users in Q4, below estimates and showing no growth from the same period in the prior year.

Morgan Stanley analysts are concerned that even in the first quarter, which is seasonally good for active-user growth, Twitter may not report strong numbers when it releases its results on April 26.

In a note on Wednesday, the analysts said Twitter's recently announced deal with the NFL to stream games has limited revenue potential because the company would not be able to sell national advertising spots, according to Quartz.

"Note that we see the 2016 net additions largely coming in the second half from benefits from the NFL deal, U.S. Presidential election, and Rio Summer Olympic games," they wrote. "An inability for these events to deliver would likely mean even more downside to our MAU estimates."

They lowered their forecast for global monthly users in 2016 and 2017 to 2.6 million and 0.3 million (from 5.2 million/3.4 million), showing that they expect even worse declines.

This would ultimately hurt Twitter's advertising revenues, they said.

Twitter shares have fallen 25% this year.