Happy Birthday Twitter. Now Grow Up.
Twitter, $TWTR, is no longer a baby. And investors expect it to stop acting like one.
The micro-blogging company turned eight this month. With that birthday has come buyer demands for Twitter to prove why shares deserve to trade at 232X expected full year 2015 earnings. Investors don’t want to hear anymore about Miley Cyrus’ 18 million followers or the Turkish government banning the site for fear of its power to spread news. They want to see accelerating user growth that promises to turn Twitter’s $665 million in 2013 revenues into Billions in annual ad sales.
@Sassy_SPY TWITTER make no money still, whatever that ANALyst are saying, Show me the money! Fakebook and Twitter both Joke.
— Mark setler (@skyzer) Mar. 25 at 09:06 AM
Twitter hasn’t delivered so far this year. Its February earnings report showed user growth and engagement is slowing. And investors are no longer willing to give Twitter the benefit of the doubt that it will reverse the trend. The stock is down nearly 28% year-to-date.
The frustration with Twitter is evident on StockTwits.com. The investing social network’s Twitter stream is rife with comments from cashtaggers fed up with the stock. Sentiment is 56% Bearish, according to StockTwits’ analytics.
$TWTR Geez will this stock ever hold a gain in it's life? Upgrades today, down 25% ytd and can't even hold a 1% gain!
— Gh0stTrade515 (@Gh0stTrade515) Mar. 25 at 09:42 AM
Many investors are betting on a big correction. The stock has 14% short interest, as a percent of float, according to ShortSqueeze.com. Some investors say shares are sure to tumble in May when 475 million restricted shares become eligible for sale.
$TWTR is too niche and lacks real solid growth of user base to be valued at these nosebleed levels. And all those shares coming….
— Syntec Ventures (@SyntecVentures) Mar. 25 at 06:12 AM
The good news for long investors is that what Twitter needs to do to accelerate growth is clear and, according to Deutsche Bank analysts, achievable. Deutsche Bank analysts released a note to clients Monday reiterating their buy rating along with a survey showing most Twitter users leave because they can’t sort through all the noise on the site and get useful news.
— Kas (@jackdamn) Mar. 24 at 03:43 PM
Deutsche’s analysts believe that Twitter can turn things around with better filtering tools and suggestions for whom to follow. In other words, by beefing up the tech that allows users to parse information as more mature social networks, like Facebook, $FB, have done. Some cashtaggers agree. They think that Twitter has become a forgotten stock poised for a breakout if it can show any progress in accelerating user growth and engagement.
— J.C. Parets (@allstarcharts) Mar. 25 at 09:57 AM
However, most investors and analysts are still unconvinced. The stock has 12 sell ratings and 13 hold ratings, according to stats on the Analyst Ratings Network. Just 7 analysts rate Twitter a buy.
The stock fell more than 4% on Monday and rebounded less than 1% by mid-morning Tuesday.
$TWTR there we go … first sign of stalling, i'm selling calls
— Aleks (@NYCStox) Mar. 25 at 09:53 AM
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