Twitter Stock Headed Lower … Indefinitely (TWTR)

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Twitter (TWTR) stock is crashing lower, down as much as 4% on Thursday after Citi analysts cut its price target from $37 to $30, and downgraded Twitter stock to “neutral/high-risk.”

While this call is playing a large role in why Twitter stock price is moving lower today, there is much more going on that could take shares significantly lower.

With Twitter stock’s latest move lower, it has now fallen well below the resistance it formed during market’s correction in late August. Even worse, the next level of resistance at $24 is rapidly approaching. If TWTR falls below $24, it has no more resistance to break its fall.

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In other words, there’s no telling how much lower TWTR could go.

Twitter Stock Has Little Left to Save It

Twitter may be trading in a technical nightmare right now, and while the market does play some role, the Citi analysts correctly pointed out that Twitter stock’s valuation and fundamentals don’t help. Twitter has done a great job at improving its monetization here in the U.S. and abroad, but the core problem still comes down to a lack of engagement and an inability to grow users at an acceptable pace.

This is a company that doesn’t even have a permanent CEO; it’s plagued by a lack of consistent leadership in a sector where vision and innovation are crucial. Twitter’s board would prefer to have Jack Dorsey as the CEO, but according to Re/code, Dorsey is committed to Square as his main priority.

In other words, before Twitter stock can find steady ground, and before investors will be confident to buy TWTR, the company needs a long-term leader who will present an actionable plan for long-term revenue, user, and profit growth.

That said, TWTR has fallen 50% over the last year, and there are many analysts who believe the stock looks cheap with a market capitalization of $18 billion. However, with the absence of a leader and no real identity or plan to regain its momentum, shares are still too expensive at 10 times sales. Not to mention, Twitter continues to spend ferociously, with operating margins of negative 30%.

Therefore, with TWTR trading below its formed resistance and so many question left unanswered, it does not appear to be a good idea to buy the stock. If TWTR had a sound underlying business or a leader like Mark Zuckerberg, Elon Musk, Larry Page, or Jeff Bezos at the helm, then such stock losses would be a good investment opportunity, as investors could trust the vision of its management.

But no such leadership is in place, and after falling below its resistance, there is nothing but air below for Twitter stock.

As of this writing, Brian Nichols did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/09/twitter-stock-headed-lower-might-continue-twtr/.

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