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Twitter Inc Stock — Why You Should Cheer the TWTR Shakeup

Twitter will respond well to the changes that Jack Dorsey is making

Twitter Inc (TWTR) stock has been crushed since the second quarter of 2015, losing well over 60% of its value, which includes losses of more than 20% this year.

Twitter Stock -- Why You Should Cheer the TWTR ShakeupIt has been a bloodbath, to say the least, with the company undergoing some major changes to try and revamp its image and operations and to re-accelerate long-term growth.

These are changes, including Twitter’s recent management shakeup, that are necessary, and will lead Twitter stock higher soon.

Shakeups Are Good for TWTR Stock

In CEO Jack Dorsey’s press release, he expressed his sadness to see the company’s engineering chief, HR vice president and heads of product and media leave Twitter. This means that just about all of the executive team at the time of its IPO are now gone.

While this may seem like bad news, sometimes a fresh start is a good thing, as past management gets complacent and tends to base decisions on what previously worked.

Fact is, the social media business is changing rapidly. It is now a crowded space where each company is fighting for marketing and ad dollars.

Up until this point, TWTR has been losing this battle, as evidenced by the declines in Twitter stock, the downward revisions for growth expectations and its lack of an identity. the departing employees may be the same executive team that was successful at building TWTR, but it is also the same folks who hit a wall when trying to grow its monthly active user base, and failed to keep users engaged on the platform or to keep the company growing in a way that meets and exceeds analyst expectations.

It’s a New Day at Twitter

Twitter has been a mess, and it needed a new look. CEO Jack Dorsey has done just that.

First, he laid off 8% of the company’s workforce. This forces Product and Engineering to work faster with a smaller and nimbler team, and forces the organization to streamline.

Second, Twitter announced plans to monetize the 500 million logged off users who see tweets but do not have actual Twitter accounts. This is a huge move, and according to Dorsey, these users can be monetized at about half the rate of logged in users.

And finally, those long-time executives who are now gone were probably resistant to the necessary changes.

Maybe they disagreed with Dorsey’s decision to embrace logged off users, instead of trying to convert those consumers to active users. Or maybe they did not like the firings and the extra work it put on their plates. Maybe it was something else, but the bottom line is that Dorsey’s changes have created an outlook where Twitter’s revenue growth can accelerate through these 500 million users and its margins can rise through job cuts.

Clearly, this is not the “old Twitter” that the formerly employed executives came to love, but a new Twitter that is focused on revenue growth, margin expansion and accountability.

Personally, I like the latter, never bought into the former, and after big losses in Twitter stock, I am a buyer of the changes that Dorsey is making.

As of this writing, Brian Nichols was long TWTR stock.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/01/twitter-stock-cheer-twtr-shakeup/.

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