3 Reasons a Turnaround Is Difficult For Twitter Inc (TWTR)


Two brokerages, Pacific Crest and Topeka Capital, have recently downgraded the shares of Twitter Inc (NYSE:TWTR). Their reasoning was that they see the end of the hope for the company’s turnaround plan. The move comes on the heels of the company reporting their fourth quarter results, which came in above the analysts’ expectations modestly. However, its revenue forecast for the first quarter was below the consensus. On top of that, the social media firm’s user count remained stagnant at 320 million compared to the third quarter while it dipped on Q-o-Q basis in the United States.

Tough For Turnaround

One of the reasons investors have lost fail in Twitter Inc (NYSE:TWTR) was that historically it failed to inspire any confidence in enhancing the sentiments of the investor with a new vision. Pac Crest analyst, Evan Wilson, concurs with this view as he expressed his opinion that he was not confident regarding the company’s turnaround plan. He referred to the return of co-founder and CEO, Jack Dorsey, as the end of the hope. He believes that there was a lot of time for  new management to not only prepare but also indicate how it was going to spur user growth.

Wilson wanted the social media company to have a five-point plan for the current year. Wilson’s plan would focus first on fixing the malfunctions in systems,  which were frustrating. The second one would be the concentration on live video, i.e. Periscope and Vine. He wanted the company to establish better tools for the content creators. The fourth point would be to make the platform a safer one from abuse. The fifth and final point would be for Twitter to invest in external developers. However, Wilson was not sure whether these points could attract new one or ones that were had not left.

Delay In Product Upgrade

The second reason was the delays in product upgrades by Twitter Inc (NYSE:TWTR). Topeka Capital analyst, Blake Harper, said that its upgrade to a rating of Buy in October was based on the belief that the new CEO would upgrade the product to accelerate not only user growth but also monetize them. However, Harper believes said that it would take more time. He also said that the user growth that Jack Dorsey promised has failed to impress and thus far implied no growth only.

Harper was also worried with the focus on live events that the social media promised. The third reason is that Twitter Inc (NYSE:TWTR)’s  priorities for the current year failed to impress investors. Its priorities centered on live content for the current year. That included updating the timeline, investing in Periscope, and enhancing on-boarding, as well as, other tools. The focus on live content indicated that it was sticking to its core operations only. While that might please power users. However, it lacked the capacity to appeal to a wider section of the audience. Of course, some people were cautiously optimistic about the company’s priorities.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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