Twitter Inc. (NASDAQ:TWTR) teases with growth, but disappoints on earnings. It teases with TV, but turns out to still be text messaging. Twitter is what it is — a window into celebrity minds and very little else.
Investors are on to Twitter, and over time the gyrations of TWTR stock have slowly settled. It looks volatile in the short-term, a sharp rise after earnings in April, a hard fall after earnings in January.
But, look at the long-term chart going back to its 2013 IPO. Since its early 2014 high of $69 per share, Twitter stock formation is a ski-jump, slowly settling down and taking investor money with it. TWTR closed trade June 13 at $16.97, down 7 cents, and opened for trade June 14 at $17.04, up 8 cents.
When Twitter next reports earnings (July 26), it is expected to lose 12 cents per share on revenue of $588 million. Compare that with revenue of $601.96 million a year ago, then tell me why you like TWTR stock.
Lost in the News Cycle
What attracts reporters to Twitter is the same thing that is taking TWTR down. It is essentially a one-way medium. Trump tweets, as other celebrities tweet, and the rest of us react. We may respond, but our responses go largely unnoticed amid the masses of other users’ replies.
Stars can use Twitter, but you can’t become a star on Twitter. For mini-stars, attempts to grow their fame via TWTR sets off a negative feedback loop, and many report feeling better once they stop using it.
Twitter’s latest moves see it as accepting its fate. The service is placing news headlines across user timelines, cutting to the chase of its role as a news service. A new “Lite” version for the Philippines features instant updates on entertainment pushed to users on slow connections. I’m sure Mindanao really cares what Rihanna is up to.
InvestorPlace analysts are not impressed. Joseph Hargett looked at Twitter stock’s technicals recently and called it “head and shoulders below the rest,” while Ryan Fuhrman bemoaned the “painful waiting game” of investors who still believe in TWTR stock.
The Return of Biz Stone
The irrational exuberance Hargett saw in the technical chart was tied to the May return of co-founder Biz Stone, who said he would try to guide the company culture in a new, more positive direction. The announcement came on Medium, not Twitter.
Moreover, Stone didn’t promise to change TWTR, or even improve it. His post reads like the words of a much older man, a straying husband returning home after sowing wild oats. Given Twitter’s continuing losses, this is not good. If the music stops and you’re still bleeding cash, I don’t want to buy you.
Richard Saintvilus sees the potential for a 20% gain in TWTR stock. That sounds great, but 20% of $17 brings the shares to $20.40. Maybe. With a tail wind. If the Gods smile.
Bottom Line on Twitter Stock
That’s not enough. You buy a tech stock because it’s hot, because its niche is hot, because you believe it can grow and turn a profit. TWTR stock is not hot, social networking as a niche is played out, Twitter is not growing and it’s certainly not turning a profit.
Twitter is a lot like Trump. A lot of big talk, a whole lot of attention and controversy, but then, eventually, nothing. Or very little. Certainly, less than advertised.
Simply put, Twitter is what it is. It shot its bolt, made its move, tried its luck, and failed. If someone wants it as a bolt-on Twitter shareholders might make a profit, but even that profit will be much less than you think and, frankly, not worth waiting for.
It’s like the five stages of fame. What’s Twitter? Get me Twitter! Get me something like Twitter! Get me a younger Twitter!
The fifth stage is, what’s Twitter? Welcome to stage five.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.
