TWTR: The One Stat That Will Ruin Twitter Stock Forever

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Twitter Inc (NYSE:TWTR) is down almost 40% year to date after crashing more than 15% a few weeks back on ugly earnings. The same old story remains a drag on TWTR stock — weak revenue and user growth, a lack of profits and a general sense that Twitter doesn’t have a strategy to find a different way forward.

But for all the problems at Twitter right now, there is one stat that should be the top priority of Twitter stock investors: Its churn rate.

When investors look at Twitter, they all see the same need for growth as users plateau.

But in truth, Twitter is not the same 300 million or so users with just a trickle of new bodies coming in. While the monthly users number does show a tiny net gain, behind the scenes there are actually a significant number of TWTR users coming in the door each month … it’s just that those new users are offset by those who quit.

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A recent report from Survey Monkey Intelligence shows that Twitter’s platform is far less sticky than Facebook Inc (NASDAQ:FB), FB property Instagram or privately held Snapchat. Furthermore, TWTR-owned services Vine and Periscope have even higher churn rates thanks in part to their relatively new nature.

It’s natural for products like Periscope to see a lot of casual users testing the waters after the debut. But Twitter cannot afford to have that kind of passer-by relationship seeing as it has been around for a decade and TWTR stock has been public for almost three years now.

This Is What’s Screwing Twitter Stock Over

This persistent churn is the single most damning statistic Twitter stock holders need to be aware of.

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Because while reporting revenue shortfalls and weak user growth is indeed a reason for the stock to sell off, the core cause of those pressures isn’t a lack of interest in the platform — it’s a lack of repeat users after they sign up.

If it was a question of marketing budget to get people in the door, then Twitter may have a way forward.

But since it’s clearly a problem with keeping people on the platform once they try it … well, Twitter stock bulls may have to come to the harsh realization that this product simply is not as useful or in-demand as they think it is.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/05/twtr-stock-twitter-user-churn/.

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