As If You Needed Another Reason to Avoid Twitter Inc (TWTR) Stock

Advertisement

Like rats jumping overboard to abandon a sinking ship, two more executives have left their posts at Twitter Inc (NYSE:TWTR). Investors, who fear the worst from the latest exits, sent Twitter stock down 4% so far for the day.

The abdications merely extend a long list of other key personnel who simply couldn’t justify sticking with the lost cause.

Fans, followers and owners of TWTR will be quick to point out that revenue and the number of active users are growing, and in time the microblogging platform will become a viable business.

That’s a pipedream, though. The people who are most familiar with the company’s prospect — Twitter’s top management — are leaving in droves. There has to be a reason.

Add Two More to the List

The latest of Twitter’s losses in the management ranks are Chief Technology Officer Adam Messinger, and V.P. of Product, Josh McFarland. Both reported on Tuesday that they were stepping down. McFarland will be joining Greylock Partners, while Messinger intends to take some time off before taking on his next challenge. Both exits appear to be amicable.

The resignation of Messinger and McFarland follow the November resignation of COO Adam Bain, though Bain was hardly the beginning (or the end) of a mass management exodus. More than half of the company’s top executives have left this year.

No one within the company is saying it, though plenty of observers have voiced it — morale within the company is low, sparking exits of key employees that creates an adverse impact on business, further sapping morale and inducing more exits. It’s a vicious cycle. As Vanity Fair’s Maya Kosoff put it, “The company’s c-suite increasingly looks like a revolving door, which doesn’t bode well for employee morale or the company’s stock price.”

It’s an understandable assessment, though perhaps an all-too-optimistic one. Most revolving doors allow just as many people in as they allow out. Twitter has seen many people make an exit, but not as many walk in. The company continues to search for a new CFO, among other positions.

Reality Check for Twitter Stock Holders

The wave of executive exits has sparked plenty of concern — and comments — from Wall Street’s professional critics. Among the most direct (and most entertaining) of those analyst assessments of all the recent Twitter news is Global Equities Research’s Trip Chowdhry. Following Tuesday’s announcement, Chowdhry said the company is “toast” and Twitter stock isn’t even worth $10. TWTR shares are currently trading at $17.26.

His bearish thesis doesn’t just stem from the loss of two executives either. He’s had his doubts from early on in the company’s existence. It’s only now, with TWTR clearly resuming a three-year downtrend, that he can gloat, “Many investors were foolishly building (an) investment thesis based on complete stupidity.”

It’s a reference back to previous assessment that the very premise of Twitter was never strong enough to appeal to a large number of consumers, and therefore not be particularly appealing to advertisers.

To its credit, Twitter has struck something of a chord with consumers on the live-action video front, drawing a decent crowd with its broadcasts of NFL games this season. Other live television projects are in the works, and some have even opined that video could end up salvaging the company.

That’s undue optimism though.

Bottom Line for Twitter Stock

As unique as the idea of Twitter TV may be, it still doesn’t answer the “what do I do with it?” question for advertisers. And any success Twitter may muster on the television front will surely be copied by other, bigger players with an existing broad reach before Twitter’s video ambitions get off the ground.

See, at the end of the day, Twitter’s microblogging simply doesn’t interest people as much as Facebook Inc (NASDAQ:FB), and there’s little that can be done to fix that. Two more executives just saw the writing on the wall.

None of this is to suggest Twitter stock won’t have a few more moments in the sun before it has to give up the ghost, one way or another. The bigger undertow, however, is dragging the company in the wrong direction.

TWTR shares will follow. Most of Twitter’s top executives are bailing out before that crash landing. Investors would be wise to take the hint.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/12/two-reasons-avoid-twitter-stock-twtr-news/.

©2024 InvestorPlace Media, LLC