It’s been over a year since Jack Dorsey took the helm at Twitter Inc (NYSE:TWTR), but the results have been far from encouraging. Consider that Twitter stock has lost about half its value.
Now when Dorsey came on board, he definitely struck the right notes — with a strong focus on innovation and product development. Yet nothing has gotten much traction.
In the meantime, rivals like Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Snapchat have continued to get a larger share of the digital ad pie. The fact is that TWTR is becoming more of a niche operator — not a top-of-mind platform for sponsors.
The latest earnings report definitely highlights this. Revenues increased only 20% to $602 million, which was the slowest pace since TWTR came public in 2013. Unfortunately, this does not look like a temporary issue.
Keep in mind that the guidance for the current quarter is lackluster, with revenues expected to range from $590 million to $610 million. The Street, on the other hand, was looking for a much more robust $681.4 million.
It’s true that Dorsey has signed some interesting deals, such as to provide real-time video streaming of sporting events. But perhaps the most important one is with the NFL, involving Thursday night games.
However, this kind of programming is episodic — not the kind experience that leads to daily engagement on par with Facebook or Snapchat. Something else: When it comes to watching sporting events, it seems like the ideal is to watch it on a big screen — not a cramped smartphone.
As InvestorPlace.com’s Dan Burrows has noted: “But [the sports programming is] hardly the sort of difference-maker that is going to give TWTR the scale and user attention it needs to compete as a truly mass-market social platform.”
Besides, TWTR has a stagnant user base, which is at about 313 million MAUs (monthly active users). By comparison, FB has 1.65 billion monthly users.
Bottom Line on Twitter Stock
When it comes to TWTR stock, the main attraction for investors has been the potential for a buyout. And this scenario is definitely reasonable. Suitors like FB, GOOG and Apple Inc. (NASDAQ:AAPL) would likely be interested in the strong TWTR brand as well as the dominance in the real-time digital broadcasting platform.
Yet buying Twitter stock on a buyout scenario is risky. Hey, how many people have tried the same with other companies like Zynga Inc (NASDAQ:ZNGA) and Groupon Inc (NASDAQ:GRPN)?
What’s more, last week’s board meeting should be a big concern for those who hold Twitter stock. According to reports from CNBC, there was no discussion of selling the company — rather, the focus was on cost cutting and possible divestitures.
This is really confounding, since the tech world is in the midst of a strong M&A wave. Even the social operator LinkedIn Corp (NYSE:LNKD) thought the timing was right to sell out.
So for investors in Twitter stock, it’s now a waiting game, to see if the sports programming can get some momentum and somehow result in better user growth. In the meantime, Dorsey will also be spending a good deal of his time as the CEO of Square Inc (NYSE:SQ).
All in all, this seems fairly odd since his rivals at companies like FB, GOOG and Snapchat have leaders who are 100% focused on their businesses — not treating the responsibility as a side gig.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
