Twitter (TWTR) shares have been in a downward spiral since April, with Twitter stock falling from $51 to as low as $24 during the late August market correction.
Yesterday’s third-quarter earnings report has extended the social media giant’s misery.
Sluggish user growth and lower-than-expected fourth-quarter sales guidance were the main culprits behind the latest round of disappointing Twitter earnings. TWTR reported 320 million monthly active users, up only slightly from 316 million in the second quarter and shy of the 323 million users most analysts were expecting.
And while sales improved 58% from the same quarter a year ago and net losses narrowed (Twitter has never been profitable), guidance for the holiday quarter came in well below consensus estimates.
Twitter Stock Hammered Again
The bears pounced immediately, pummeling Twitter stock to the tune of a 12.7% decline within minutes of the after-hours earnings report. TWTR futures recovered slightly prior to the bell this morning. But enough damage had been done to a stock that had already been beaten down for the past six months.
Value investors might see this Twitter earnings flop as a buying opportunity. But the company simply hasn’t earned that kind of confidence since coming public nearly two years ago.
Twitter stock was on fire out of the gates, debuting at $26 on Nov. 7, 2013, and advancing all the way to $73 by Christmas of that year. Since then, it’s been all downhill.
By May of last year, TWTR had dipped to $30. It soon rebounded, rallying all the way back to $55 by last October. It hasn’t been higher than $52 since. The stock fell off a cliff in April, gapping down from $51 to $38 on enormous selling volume. It bottomed at $24 on Aug. 25, bumped up against resistance at $31 several times this month.
And now it’s plumbing the depths yet again.
Twitter’s popularity is undeniable. Even the Pope uses Twitter. But TWTR simply hasn’t figured out how to make money. And now its user base is stagnating.
Gaping Hole Between Twitter and TWTR
There are certainly things to like about Twitter as a company that go beyond its seemingly universal recognition. Revenues are growing at a lightning-fast clip — the $1.78 billion the company has done over its last four quarters is nearly double the $973 million it sold in the previous four quarters. Ninety percent of that revenue comes from mobile ad sales, which shows how strong a foothold Twitter has in one of the fastest-growing industries on the planet.
Oh, and the company just hired a new CEO, co-founder Jack Dorsey, to right the ship.
For all its growth, though, the stock simply hasn’t followed suit. Less than half (46%) of all TWTR shares are held by institutional investors. Perhaps they’re waiting for the company to finally turn a profit before jumping in the pool. Whatever the reason, Twitter stock has not performed up to expectations. If you bought shares on its second day of trading two years ago, you would be sitting on a 39% loss right now.
Twitter is all the rage in our everyday lives. Among other things, it has revolutionized the way we receive (and report) news, enabling anyone with a smartphone and opposable thumbs to share their thoughts with the world 140 characters at a time.
TWTR as a stock, however, has been a major disappointment. Until it shows any signs of life, it’s not worth your investment.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
