Twitter Inc. (TWTR) is one of my favorite companies on the planet. But TWTR stock? Different story.
I am a regular user of Twitter and refresh my feed some 50 times a day to get a filtered view of the latest news from my favorite sources. It’s an invaluable service — particularly for someone in a fast-moving field like finance.
I also love reading about Twitter itself, which, as Bloomberg’s Justin Fox just accurately quipped, is “America’s most entertaining corporation” with all its board room shenanigans and clumsy strategies.
But as an investor, the bottom line is still the bottom line for me — and TWTR stock at $28 or so sucks just as much now as it did when I panned it in July around $36… and when I said steer clear roughly a year ago at $40.
The focused experience I enjoy as a consumer, free of clutter and distraction on my mobile device, is also free of those pesky ads that happen to generate revenue for TWTR stock. Twitter has been miserable at making money on its existing audience in part because it remains constrained by its small screen.
Twitter Won’t Turn Around Anytime Soon
There are half-baked “solutions” to this problem, of course, like doing away with a 140 character limit and experimentation with video via the Periscope app to boost engagement for TWTR. However, even if any of these plans juice revenue per user, there remains the crushing problem of user growth slowing to a crawl.
How slow? Well, consider TWTR stock saw less than 3% user growth sequentially last quarter and just 15% user growth year-over-year.
Oh yeah, and on top of all that, Twitter still isn’t turning a profit.
Look, this company isn’t even on the same planet as Facebook (FB), which has over a billion users and is turning a substantial profit. Twitter has neither the scale nor the cash flow to make any legitimate comparisons.
You can talk big about Jack Dorsey as a white knight riding in to save his creation, or hold out for Google — er, Alphabet (GOOG, GOOGL) — snatching up Twitter with a massive acquisition. But the cold, hard facts of Twitter right now show a company in distress and growth rates that are already decelerating rapidly. A change in ownership or a new exec at the top won’t fix that soon, if ever.
So as you read the breathless commentary about Jack Dorsey and big plans for Twitter 2.0, remember one thing: Your preferences as a consumer can’t change the underlying quality of an investment.
TWTR stock is still a money loser, both for investors and internally based on its own quarterly filings. I fully expect another loss when Twitter earnings hit in a few weeks, and that will only validate the downtrend that has plagued TWTR for some time.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at email@example.com or follow him on Twitter via @JeffReevesIP.
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