Here’s the good news, bad news for Twitter: Analyst

Twitter (NYSE: TWTR)'s user base may have stabilized, but the company's revenue from new ad products is coming at the expense of its legacy advertising business, James Cakmak, analyst at Monness, Crespi, Hardt & Co., said Wednesday.

The company's shares have fallen more than 62 percent during the last year as investors fret over stagnant user numbers.

Twitter reported last week that monthly active users rose to 310 million in the first quarter, having fallen by 2 million to 305 million in the final quarter of 2015.

That development gives investor reasons to cheer, as do revenue opportunities baked into Twitter's partnership with Google (NASDAQ: GOOGL) to display real-time tweets in search results and its recently announced deal with the NFL to stream Thursday night football games.

But that good news is being offset by bad news, according to Cakmak.

"All the new dollars that they are getting are completely cannibalizing revenues from their old products, and the fact that even though impressions — the number of times you view adds — is growing, pricing is falling off a cliff," he told CNBC's "Squawk Box."

This is happening as Twitter focuses on video ads that automatically play when a user scrolls past them, he said. However, Facebook (NASDAQ: FB) has managed to increase both impressions and pricing as demand grows for its own autoplay ads, he added.

Twitter's first-quarter ad sales came in at $531 million, up 37 percent from the prior-year period.

In Cakmak's view, the social media site's strategy is sound. He noted that 77 percent of people use computer and mobile devices while watching television.

"Twitter certainly has an opportunity here. I think one of the things that gets lost is how important Twitter is for Google, because with the Google search partnership they're able to get the real-time search results," he said.

"Without that, [Google] will lose relevancy in real time, giving Facebook a window."

For that reason, it makes perfect sense for Google to buy Twitter, Cakmak said. While the partnership gives them access to real-time results, a purchase would eliminate the risk of a someone else purchasing Twitter, he added.

However, Google is likely treading lightly as it faces regulatory challenges in Europe, Cakmak noted. Google-parent Alphabet has not indicated that it intends to buy Twitter.

— CNBC's Jacob Pramuk contributed to this story.

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