I am sure you are aware Twitter’s stock price is down considerably from their 52 week High of $55.99. Yesterday, the social media company closed at $26.86, down 2.01%. The fall of the internet giant comes from investor concern about attracting new users. This week, the company was hit with more bad news
First, let’s recap. Dick Costolo stepped down as Twitter CEO on July 1, 2015, replaced on an interim basis by Twitter co-founder and chairman Jack Dorsey. Costolo’s vision to enhance the micro-blogging platform, in order to attract new users, fell short. Dorsey then announced plans to make Twitter more like Facebook which, in my opinion, shows a lack of understanding of what made Twitter popular.
Second quarter results were announced on July 28th, and the stock closed that day at $36.54. Despite the upheavals with management and a poor quarterly performance, some financial experts at the time, like Jim Cramer, continued to be optimistic about Twitter’s potential. He stated, “’the pipe of what Twitter wants to do in the second half is so good’ that if the stock were to drop down to the $30 to $31 range… then investors would see a lot of buy-ins.” Cramer was wrong.
So, what is in the news this week?
Akash Garg moves to Uber
Akash Garg was the senior engineering director at Twitter. Tuesday, Garg tweeted he’s moving to Uber, the private car service, and will be heading their mobile and web platform teams.
1/ After an amazing 4+ years at @Twitter, I am saying goodbye to my friends and co-workers
— akashgarg (@akashgarg) September 22, 2015
3/ I am excited to lead the mobile and web platform teams @Uber. Looking forward to this new adventure!
— akashgarg (@akashgarg) September 22, 2015
While some news sources are reporting there is no “mass exodus”of talent from Twitter, others are not as positive. Business Insider is calling what is going on as “brain drain.” This all begs the question, is Twitter’s top talent jumping ship because it is sinking?
Instagram monthly users passes Twitter
Facebook’s announcement of Instagram’s user growth has got many in the tech business world talking. Instagram has gained an additional 100 million users since the beginning of the year, which translates into 400 million monthly active users. Twitter is sitting at only 316 million users.
In fairness, comparing Twitter to Instagram is a bit like comparing apples to oranges. Twitter is more about real-time conversations and breaking news, while Instagram more personal, like Facebook itself. However, none of that probably matters to investors, who could care less. They just want numbers.
Photo and video sharing apps have become very popular in recent years, with Instagram leading the charge. However, none of them fill the niche that Twitter does. I talk a lot about the psychology of Twitter. It connects you to the world community in a unique way. One can use Twitter as a bullhorn to shout to the world, or it can be a chatroom.
Twitter enables you to share the experience of a real world event, in real time, with entire world. You can also fulfill a need to share your opinion to an audience beyond your immediate circle. Any person’s opinion can instantly become as important as any politician or CEO.
Predicting Twitter’s Future
TheStreet Ratings team has Twitter as a Sell, and is giving it a rating score of D. They are describing positive results as difficult to achieve for investors, and they have been disappointed with the stock’s historical performance. So, what do you think?
Twitter’s stock is down 25.20% year-to-date, and down 45.94% from their 52 week high. The company is sitting close to their initial public offering price of $26. Some investment experts are saying it is too late to sell. Moreover, some are expecting someone like Facebook or Yahoo to come in with a takeover when the price falls below $20.
As an amateur investor, my opinion is worthless, but here it is anyway. Under “normal” conditions, I would be buying as Twitter’s price falls. I like Twitter. However, the Dow is down roughly 2000 points from the 52 week high, and I am getting the vibe it is heading below 15,370, the 52 week low. The NASDAQ Composite and S&P 500 are in similar trouble.
If I already owned Twitter, I probably would not be selling it. I’m also not going to be running out to buy it, not because of the takeover possibility, but because of the overall current market conditions. Many of my favorite stocks are taking a hit. I’m waiting for the market to find a bottom, and I don’t think we will be there before the end of the year.
Goldman Sachs is predicting $20 a barrel for oil. That prediction is being made partly because of production. However, it is also because of weakness of the world economy. I’m personally expecting markets to find their bottom when oil is around $30. Therefore, my personal opinion is most stocks are either a Sell or Hold until then. Of course, I’m just some guy on a blog.