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Twitter's Troubles Persist, Buyout Speculations Gain Steam
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Apparently, analysts believe that if things do not drastically improve at Twitter Inc. , the company will have no other option but to put up a “for sale” signboard as early as next year.
The news comes after yet another management rejig. This time, consumer product head, Jeff Seibert has been reportedly moved to head Twitter’s developer app Fabric. The company is now in the process of finding a replacement for Siebert who had been the fourth consumer product head since 2014.
Just a few days back, chief of business development, Jana Messerschmidt, and chief of media and commerce Nathan Hubbard, quit Twitter. In January, the company lost four high profile executives –media head Katie Jacobs Stanton, product head Kevin Weil, the head of the engineering division, Alex Roetter, and HR head Brian Schipper.
Though second time CEO Jack Dorsey has stressed on recruiting “great talent”, the frequent management reshuffle, at a time when the company is overhauling its entire operations, isn’t making things easier. Plus, competition is intensifying with other social media services Facebook, Instagram and Snapchat rapidly growing their user base, whereas Twitter’s user base is almost stagnant. Recently, Snapchat was in the news for having amassed more daily average users than Twitter in just over four years while Twitter has been around for a decade.
Analysts observe that instability at the consumer product division isn’t to be taken lightly. Moreover, frequent managerial changes have escalated concerns “that changing the cadence for product innovation is more difficult than previously presumed”. Analysts also opined that "if the current trend of meager user and engagement growth remains, we think it's inevitable that Twitter will need to pursue M&A alternatives."
Analysts expect tech behemoths like Facebook , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) to be the most probable suitors. Recently, there were reports that Twitter and Yahoo (YHOO) had held talks for a probable merger a few months back.
However, another analyst has a different take on the matter. He believes that Twitter’s buyout could cost $10 billion and he isn’t sure that “whether such an acquisition would be worth the capital”.
Buyout rumors have been around for quite some time now. Twitter at present is going through one of its toughest phases since its inception. Dorsey’s coming back to the helm for the second time was widely cheered by investors but so far he has not been able to mitigate Twitter’s problems.
Twitter’s troubles are plenty with no immediate solution in sight. There has been hardly any improvement in the user base and the company is yet to turn up profits in its 10-year history. Moreover, investors were disappointed when Twitter said that “brand marketers did not increase spend as quickly as expected in the first quarter”. Brand marketing is the mainstay of Twitter’s advertising revenues, which in turn comprises nearly 90% of the total revenue. Moreover, expecting no near-term respite, Twitter provided its second-quarter revenue guidance of $590 million to $610 million, which was nowhere close to analysts' expectations.
Twitter has been trying new measures to counter the slowdown in user base and make the platform more engaging. From Moments to integration of Periscope, to lifting the 140 character limit from direct messages and changing the way tweets are displayed, the company is leaving no stone unturned to lure users.
Moreover, Dorsey stressed on “hiring and investing in talent”. He himself had given away one-third of his stock worth $200 million to employees soon after being re-elected the CEO. Moreover, per media reports Twitter has been giving away extra restricted stock as well as paying cash bonus ranging from $50K to $200K to make employees stay longer with the company.
However, the changes haven’t been that effective if we go by the growth in user base since Dorsey took over as CEO in Oct 2015. Also, executive departures continue. A look at share price movement also reflects the dismal state of affairs. Twitter’s stock has lost almost 35% of its value so far in the year and is trading at $15 lower than its IPO price of $26. Also, sharing a CEO with another company, Square isn’t doing Twitter any favor.
Twitter is currently a Zacks Rank #3 (Hold) stock.
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Twitter's Troubles Persist, Buyout Speculations Gain Steam
Apparently, analysts believe that if things do not drastically improve at Twitter Inc. , the company will have no other option but to put up a “for sale” signboard as early as next year.
The news comes after yet another management rejig. This time, consumer product head, Jeff Seibert has been reportedly moved to head Twitter’s developer app Fabric. The company is now in the process of finding a replacement for Siebert who had been the fourth consumer product head since 2014.
Just a few days back, chief of business development, Jana Messerschmidt, and chief of media and commerce Nathan Hubbard, quit Twitter. In January, the company lost four high profile executives –media head Katie Jacobs Stanton, product head Kevin Weil, the head of the engineering division, Alex Roetter, and HR head Brian Schipper.
Though second time CEO Jack Dorsey has stressed on recruiting “great talent”, the frequent management reshuffle, at a time when the company is overhauling its entire operations, isn’t making things easier. Plus, competition is intensifying with other social media services Facebook, Instagram and Snapchat rapidly growing their user base, whereas Twitter’s user base is almost stagnant. Recently, Snapchat was in the news for having amassed more daily average users than Twitter in just over four years while Twitter has been around for a decade.
Analysts observe that instability at the consumer product division isn’t to be taken lightly. Moreover, frequent managerial changes have escalated concerns “that changing the cadence for product innovation is more difficult than previously presumed”. Analysts also opined that "if the current trend of meager user and engagement growth remains, we think it's inevitable that Twitter will need to pursue M&A alternatives."
Analysts expect tech behemoths like Facebook , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) to be the most probable suitors. Recently, there were reports that Twitter and Yahoo (YHOO) had held talks for a probable merger a few months back.
However, another analyst has a different take on the matter. He believes that Twitter’s buyout could cost $10 billion and he isn’t sure that “whether such an acquisition would be worth the capital”.
Buyout rumors have been around for quite some time now. Twitter at present is going through one of its toughest phases since its inception. Dorsey’s coming back to the helm for the second time was widely cheered by investors but so far he has not been able to mitigate Twitter’s problems.
Twitter’s troubles are plenty with no immediate solution in sight. There has been hardly any improvement in the user base and the company is yet to turn up profits in its 10-year history. Moreover, investors were disappointed when Twitter said that “brand marketers did not increase spend as quickly as expected in the first quarter”. Brand marketing is the mainstay of Twitter’s advertising revenues, which in turn comprises nearly 90% of the total revenue. Moreover, expecting no near-term respite, Twitter provided its second-quarter revenue guidance of $590 million to $610 million, which was nowhere close to analysts' expectations.
Twitter has been trying new measures to counter the slowdown in user base and make the platform more engaging. From Moments to integration of Periscope, to lifting the 140 character limit from direct messages and changing the way tweets are displayed, the company is leaving no stone unturned to lure users.
Moreover, Dorsey stressed on “hiring and investing in talent”. He himself had given away one-third of his stock worth $200 million to employees soon after being re-elected the CEO. Moreover, per media reports Twitter has been giving away extra restricted stock as well as paying cash bonus ranging from $50K to $200K to make employees stay longer with the company.
However, the changes haven’t been that effective if we go by the growth in user base since Dorsey took over as CEO in Oct 2015. Also, executive departures continue. A look at share price movement also reflects the dismal state of affairs. Twitter’s stock has lost almost 35% of its value so far in the year and is trading at $15 lower than its IPO price of $26. Also, sharing a CEO with another company, Square isn’t doing Twitter any favor.
Twitter is currently a Zacks Rank #3 (Hold) stock.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>