Investors Turning Bearish as Twitter Stock Continues to Plunge

By Prashant Sharma
Investors are looking disappointedly at Twitter (NYSE:TWTR) stocks; they have dropped significantly in the last 2 months from $24.87 as of October 5 to $18.19 as of November 29. This downfall in share prices has not only impacted the shareholders, but all the employees of Twitter, as a huge amount of their compensation is offered through stocks. Also Twitter recently announced, during their Q3 earnings call, that they are planning to cut down 9 percent of their workforce.
At first investors were bullish about Twitter since there were ongoing discussions about the company being acquired by Tech giants like Alphabet Inc. (NASDAQ:GOOGL), Walt Disney Co (NYSE:DIS), Microsoft (NASDAQ:MSFT) and Salesforce.com Inc. (NYSE:CRM). But Twitter stocks started collapsing once these companies opted out of the bidding process. With every withdrawal, the shares dropped by a few points, which reduced the market cap and overall size of the company. Twitter could remain independent if there aren’t any serious bids but considering its lack of growth and worries about future earning potential, their share prices may likely continue to drop. The stock surged significantly during the summer months and rose up to 70 percent to reach $24.85 as of October 5. The investors showed interest in Twitter stocks due to the rumours of its buyout but once these proved to be false, traders dumped the stock en masse.
Twitter released its Q3 earnings report in October which beat analysts’ expectations in terms of revenue and earnings per share. They reported Q3 revenue of $616 million versus analysts’ expectations of $605.8 million. The Q3 EPS was $0.13 versus the analysts’ expectations of $0.09. Despite the strong earnings report with a revenue growth of 8 percent YoY, Twitter is planning to lay off 9 percent of its workforce. The company’s net income was around $92 million with advertising revenue showing only 6 percent YoY growth.

“While Twitter managed to break through the 20-day moving average, 50-day moving average, and 200-day moving average, it has struggled to gain ground. Over the long-term, Twitter has not performed well and remains a highly risky investment for traders.”

Twitter has lot of things to improve such as restricting user abuse and expanding their user base, attracting TV ad budgets and improving their overall revenue. They have to address all these issues swiftly in order to gain confidence from their investors and to boost their share price. If they fail to take prompt actions and regain investor confidence, their share prices might depreciate further and they may end up sharing the same fate as Yahoo.
About the Author:
Prashant Sharma leads the editorial charge at TechPluto, an emerging platform for the sprouting Startup scene and loves talking about the Silicon Valley Honchos and Bigwigs over there.