Why Is Twitter Stock In A Flutter?

Twitter Struggles to Maintain Momentum amid Sea of Failed Experiments by CEO

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The irony is all too clear for those who follow the man behind Twitter, CEO James Dorsey and his most active user, President Donald J. Trump. Dorsey is on the ultra-left of the political spectrum, and Trump is positioned to the right. Part of the reason Twitter has gained such widespread popularity is the very man that Dorsey finds himself at odds with. In fact, it is Dorsey who has given Trump the ultimate social media platform and Trump has capitalized with his 22.4 million followers under his personal account and 14.4 million followers under his moniker @POTUS.

One of the biggest changes at Twitter was the Moments tab. At the time it was launched, Jack Dorsey labeled it a bold new experience and likened it to a paradigm shift in human thinking. Fast-forward to the present day: Moments has disappeared. Twitter has been writhing in agony for far too long. The stock has failed to take flight, despite hitting a 52-week high of $25.25 in recent months. The stock has a 1-year target estimate price of just $16.32 – that’s your cue that bearish trends are underway.

If we look at the 50-day moving average of the stock, it is now $17.77, and the 200-day moving average is $17.57. Both these figures are priced well above the current price of Twitter, indicating that this stock is in trouble. Indeed, the movement of Twitter’s price since October has been nothing short of disappointing. The only time the stock showed any promise was when a possible buyout deal was in the works, but that was soon scuttled and the stock dropped precipitously.

Why is Twitter performing so badly if it’s actual earnings exceeded forecasts?

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If we look at the past 4 fiscal quarters, Twitter has exceeded expectations by a long margin. From Q4 2015 through Q3 2016, nothing but strong earnings surprises have been generated. Indeed, the earnings surprise history, as listed on NASDAQ is extremely bullish. It is evident that the only reason Twitter has generated positive earnings surprises is that the negative EPS recorded was less than the consensus EPS forecast. In other words, nobody was expecting positive earnings per share from Twitter and that’s precisely why the stock has not been able to generate positive momentum. The most important reason why Twitter is performing so badly is that so many high-level executives have left the company. Consider that the following senior executives have moved away from Twitter in recent months:

• CTO Adam Messinger
• VP of Product Josh McFarland
• COO Adam Bain
• VP of at Sales Richard Alfonsi

Twitter Redesign Unlikely to Help Ailing Company

Twitter has embarked upon a redesign campaign, as it desperately tries to reignite interest in the stock. It is now in partnership with the Cheddar news network and the NBA, and it is testing out a new tab known as Explore. The company is trying to simplify the entire process of using Twitter, and all the trending features it offers. Various research initiatives have been conducted, and the company believes that the Explore option will make it easier for people using the social media network to find popular trending items. At present prices, the company is worth $11.96 billion with a -19.53 price/earnings ratio. The recommendation rating for the stock is anything but positive. On a scale of 1.0 (buy) to 5.0 (sell), Twitter is at 3.2. It was recently downgraded (17 January 2017) from a buy to a neutral rating by UBS.