Twitter Inc (NYSE:TWTR) operates a platform that has performed well in every way except financials. The company’s platform is a popular form of communication for the likes of Katy Perry and President Trump; however, TWTR stock has failed to achieve the success of rivals such as Facebook Inc (NASDAQ:FB) or LinkedIn before its acquisition by Microsoft Corporation (NASDAQ:MSFT).

With monthly active users (MAU) and revenue leveling off, Twitter will have to find new revenue sources if it’s to realize investment value that matches its popularity.

TWTR Stock Still Below IPO Price

The TWTR stock price has struggled for most of its existence. With an initial bump after its initial public offering (IPO), the stock rose to over $74-per-share in late 2013. But it struggled throughout 2014 and 2015 amid turmoil inside the C-suite.

Twitter fired CEO Dick Costolo in early 2015. The stock fell further. Naming Jack Dorsey as CEO did not arrest this decline. The TWTR stock price fell below the IPO price and it has traded in the teens since early 2016, falling to an all-time low of $13.92 in May 2016. The stock held to a trading range in the teens despite the overall market trading at record highs. The TWTR stock price today stands at about $17. 

So what is the root cause of Twitter’s troubles?

Twitter’s Concerning Financial Metrics

TWTR’s financial metrics could be a concern to investors. The five-year growth rate for revenue stood at almost 90%. However, analysts expect year-over-year revenue to decline for the first time in its history. Falling advertising revenue caused this decline, despite the popularity of Periscope, Twitter’s video platform.

Moreover, revenue has never been high enough to turn a profit. Twitter is expected to report a loss of 27-cents-per-share for 2017. This represents an improvement over the 65-cents-per-share loss in 2016.

Other financial readings show negative performance. Return on assets (ROA), the percentage of profit the company returns compared to overall resources, came in at a loss of 6.9% for 2016. This number has never been positive. Return on equity (ROE), meaning profits generated per-dollar of stockholders’ equity, was down 10.1% in 2016.

Now, user metrics also show signs of stagnation. MAUs declined in the second quarter as Twitter use in the United States fell by 2 million users. This is after MAUs increased by 6% in the first quarter. Global use remained steady at 328 million. However, MAUs compare unfavorably to Facebook, which is at about 2 billion monthly users.

TWTR Can Still Turn Itself Around

Despite its problems, Twitter, and by extension TWTR stock, could still turn itself around. The 328 million monthly users represent a strong base. Any change made by Twitter to improve engagement will be noticed immediately by a large number of people. Additionally, with its position as the choice platform of the President and several celebrities, the company could build financially beneficial relationships with these figures. It should engage these figures directly on joint ventures using Twitter and Periscope.

Another advantage for Twitter is that many users see the 140-character limit as a benefit. The limit allows for quick, in-the-moment responses. Discussions can flow more easily. On Facebook, discussions can stall in the face of responses taking several hundred words each. As such, the company should reach out to discussion leaders and encourage them to use its platforms for their talks. Ads could also be tailored to discussions when a talk mentions a product or service.

The return of TWTR stock hinges on increasing revenues and reversing its decline in MAUs in the United States. In its current environment, profits remain out of reach and revenues and user growth are leveling off. Given this reality, Twitter needs to change its approach to maintain its viability.

Celebrity activity, discussions, or a different approach for Twitter could produce revenue increases and user growth. If Twitter realizes that increased engagement, the TWTR stock price of today is a bargain. However, until the company shows signs of a changed approach, investors are likely better off avoiding the stock.

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