Investors briefly celebrated the naming of Twitter (NASDAQ:TWTR) Chief Technology Officer Parag Agrawal as CEO. Then the stock price resumed its downward course. For TWTR stock, what does Parag’s appointment mean for shareholders?
Twitter was trading early today at $43.21, having fallen over 21% in just the last month. Shares were at over $66 as recently as Oct. 19.
This still leaves the market capitalization of the social media site at $34.8 billion, about 7 times this year’s expected revenue of $4.8 billion. The company lost $536 million during the third-quarter, after paying $809 million over a 2016 shareholder lawsuit. Take out the suit’s costs and the company broke even for the quarter.
So is it time to buy Twitter?
Agrawal, 37, is part of a trend in Silicon Valley, where marketing-oriented entrepreneurs give way to technology experts, many of them natives of India. Agrawal graduated from India’s elite IIT-Bombay, which celebrated his appointment. He also has a degree from Stanford.
Agrawal has been with Twitter for a decade and was named CTO in 2017. He is called “pragmatic,” working behind the scenes on the site’s technical infrastructure.
Parag’s own Twitter account focuses on internal corporate business. But he did recently retweet Techdirt founder Mike Masnick in praise of BlueSky, an effort Agrawal has led to create an open standard for social media.
Agrawal has also supported efforts at the company to admit mistakes, and to incorporate cryptocurrencies like Bitcoin (CCC:BTC) into the platform. Chief Financial Officer Ned Segal supports the engineering initiative but has said investing in Bitcoin “doesn’t make sense right now.”
Twitter’s biggest problem right now is monetization.
Twitter has rolled out features to tip users. A subscription often dubbed Twitter Blue debuted in June at $3.49 per month. Blue also includes ad-free access to some published articles. In addition, Twitter has acquired Revue, a paid-newsletter service that competes with Substack. Twitter Spaces, a social audio app that competes with Clubhouse, was launched a year ago.
Agrawal also faces the task of cleaning up Twitter, which has become a cesspool of anger, often generated by bots. This has turned off many celebrities, whose participation is essential to the platform’s success.
A day after Dorsey’s announcement, Twitter did say it would no longer allow the sharing of private photos or videos without consent. (Celebrities are an exception to this rule.)
Bluesky is a big part of Twitter’s ultimate content solution, according to Agrawal. He says it gives users control over what they see on the service. But the same tool could be used by hackers to manage Twitter attacks. Keeping anonymous users off the site would seem a simpler solution, but Agrawal has yet to buy it.
The Bottom Line
If you want to speculate on TWTR stock, this is a key bit of news. Salesforce closed its $27.7 billion acquisition of Slack on July 21 and until its recent earnings miss, had risen nearly 28%. Salesforce’s pattern is to make big deals, take a hit to the stock price, recover from that hit, and then buy again.
When Salesforce, with its market cap of $250 billion, is ready to buy again — then Twitter might be affordable.
On the date of publication, Dana Blankenhorn held no positions in any securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. Just in time for the holidays he has a collection of COVID-19 stories at the Amazon Kindle store. Write him at email@example.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.