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The company’s disappointing share prices over the past few years could be poised for a turnaround.
Twitter’s (NYSE:TWTR) ten year birthday has got investors talking about future of the company. Once lauded as a ground-breaking tech stock, with the potential to become the next Facebook (NASDAQ:FB), today it’s a struggling company with sliding share prices. Significantly, the company has lost 75 percent of its value in the past two years. However, some investors aren’t ready to give up on the company just yet.
Company history
In 2003, the company went public, with much fanfare. However, share prices never really reached the highs that some social media investors had hoped. Forbes reports that share prices fell from a peak of about $69 to their current price of $16. To put this into perspective, that’s $40 billion in market value gone. Although the company brought in $2.2 billion last year (that’s a 50 percent increase from the previous year), Twitter has failed to show that this revenue is impacting its bottom line. Instead, stock options and equity grants to employees has caused the company to lose $500 million in 2015.
Situation today
Profit Confidential believes that Twitter is also suffering from a significant loss of leadership talent. In January, four of the company’s top executives left the company and Twitter has yet to find replacements. Therefore, CEO Jack Dorsey is now charged with the challenge of creating an environment with strong, long-term executive leadership. Although this certainly poses a short-term obstacle, the exodus of the company’s vice presidents could also pose an opportunity for Twitter, leaving Dorsey freer to pursue a new vision for growth.
Opportunities for growth
Meanwhile, the company is starting to see another area of growth: advertising. The company’s most recent financial report illustrated that ad revenue accounted for more than 90 percent of total revenue, signifying that this may be the way of the future. If Twitter can keep working to monetize ads, it opens up the possibility of a brighter future for shareholders. With Dorsey free to pursue his vision of the future – and, in doing so, help to recover the platform’s flagging user base – and advertising revenue at an all time high, the future doesn’t look quite so dark for Twitter. For investors willing to take a risk on these factors, now may be the perfect opportunity to buy low.
Securities Disclosure: I, Morag McGreevey, hold no direct investment in any of the companies mentioned in this article.
