I’ve been unapologetically bearish on Twitter Inc (TWTR) stock for well over a year now, for a laundry list of very simple reasons.
Yesterday, Twitter reported fourth-quarter earnings. And yesterday’s report showed that my concerns are still well-founded … but vastly more serious than ever before.
My main gripe with TWTR stock over the past year has been the ugly combination of an offensively high valuation and pitiful user growth. There are other issues to be sure, and I’ll touch on those a little later, but for now, I just want readers to hone in.
If you take one thing away from this article … actually, if you learn one thing in the course of your life today, let it be this: Anyone who owns TWTR stock should not own it when the markets close at 4 p.m. this afternoon.
TWTR: No End in Sight
Twitter stock is down more than 5% in early trading on Thursday, with shares trading just above the $14 level as I write this. To give you a sense for just how bad that is, it’s an all-time low … so it’s prettay, prettay, prettay bad, as Larry David might say.
On the face of it, Twitter’s holiday quarter didn’t seem that bad. In fact, revenue jumped 48% year-over-year to $710.5 million from $479.1 million. Analysts were looking for TWTR stock to log revenue of $709.94 million, so Jack Dorsey & Co. were able to beat on the top-line.
Bottom-line numbers were also better than consensus, with earnings per share clocking in at 16 cents, beating calls for EPS of 12 cents by 33%. Pretty good, right?
Smoke and mirrors, I say!
The big, fat, horrendous beast of a number that convinces me TWTR stock is doomed forever is 320 million. That’s the number of Twitter’s monthly active users, or MAUs. And that 320 million figure is the same as it was in Q3. Twitter has actually stopped adding new users. This has never before happened in the company’s history.
Going into yesterday’s earnings report, I actually, uncharacteristically and against my gut, held out hope that the TWTR stock price had bottomed. I reasoned that the rapid revenue growth the company continues to put up isn’t seen very often, and all the negative sentiment surrounding the stock right now made it likely that shares were simply oversold.
No. Twitter stock cannot be oversold, because it deserves everything it gets. A number of high-level executives recently fled the company without warning, raising some serious leadership questions. As if there needed to be more leadership questions: Co-founder Jack Dorsey was just named permanent CEO in October, and now he’s pulling double-CEO duty at TWTR and Square (SQ).
I think that’s profoundly unfair to investors in both companies. Moreover, Twitter is trying so desperately to boost engagement that it’s changing a core part of what makes Twitter unique: its real-time feed. The company described the initiative yesterday:
“You flip on the feature in your settings; then when you open Twitter after being away for a while, the Tweets you’re most likely to care about will appear at the top of your timeline — still recent and in reverse chronological order.”
Sounds awfully similar to Facebook (FB), doesn’t it? That’s because it is.
At the end of the day, Twitter has its own identity. It’s Facebook’s far less attractive cousin, the cousin who’s already peaked (way early) in life; the cousin with nothing left to look forward to, whom nobody wants to marry.
Sell TWTR without a second thought.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at email@example.com.