Twitter Inc (TWTR): Is the Worst Yet To Come?

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 دوشنبه 16 آذر 94 ساعت: 08:42:29

In October, the management introduced a new feature called ‘Moments’ hoping that it would assuage some of the user growth concerns and bring a turnaround in the company’s present state of affairs. Moments is a curated list of stories made up of tweets, images, videos, Vines, and GIFs. It updates one about the latest trending news and events.

However, competition followed suit. Recently, video messaging app, Snapchat introduced a similar feature called Story Explorer. Story Explorer allows a user to see more snaps of a moment he or she has shared. This would enhance user experience as one can view a moment from different perspectives or feel that he is right there when the news just broke.

To view a story from different angles, people need to submit the different snaps. This is similar to the submission of different tweets about a story. Story Explorer could potentially put an end to Twitter’s ambitions with Moments given Snapchat’s popularity as the premier video sharing app. In case of Moments failing to live up to expectations, Twitter will see a downturn in a newly launched feature, adding to its core product suffering.

Earlier this month, research from Detwiler Fenton cast doubts on Twitter’s ability to entice new users through Moments. The firm’s analyst, Alex Arnold thinks that around 50 million monthly active Twitter users in US seems to be near a top. He added that the company still has growth opportunities if it can tap international users and non-logged in users. The analyst considers Twitter’s efforts in demographic targeting for advertisers and mobile commerce as not likely to bear fruit atleast in the next couple of years.

In the past, commentators have highlighted the active indulgence of Twitter executives in insider selling activity. Early this year, CNBC’s Jim Cramer noted heavy insider selling by the top brass of the company and said that this should be stopped if the executives want to show that they have confidence in Twitter. He said that a six-month moratorium should be placed on Twitter insider selling. However, insider selling might have slowed, but has not stopped.

This month, Senior Vice President of Product, Kevin Weil sold a total of 28,658 shares of company stock worth $820,336. Senior Vice President – Engineering, Alexander Roetter sold 30,208 shares (valued $881,188) in a pair of transactions that occurred on November 5th. Such level of selling, unfortunately, shows that Twitter executives are not confident about the future of the company.

Also, Jack Dorsey currently heads both Twitter and Square Inc (NYSE:SQ). The pressure of handling both the companies could potentially impact his performance. Square shareholders might push Mr. Dorsey to step down from Twitter in order to put his sole focus in Square. In case of Jack Dorsey stepping down, the difficult phase of finding another candidate will again start for the management. It should be noted that Twitter made the Mr. Dorsey’s CEO position as permanent nearly five months after Mr. Costolo’s resignation.

These points underline how difficult it is for Twitter to bring a turnaround. Our recent technical analysis on the stock also shows a bearish outlook in the near term. The analysis is as follows.

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Twitter has failed to hold on to price break above $29 and has retreated towards $24.90 keeping the bearish theme intact. The downside is possibly headed towards $22.94 with immediate resistance placed at $28.46 seen blocking any recovery attempt. Below there, the stock can slide further towards $17.42. Present price placement below key intermediate to long term averages (50, 100 and 200 DMAs) is supportive of above view. We need a breakout above $31.87 to revisit our stance.

Our technical analysts advise traders to reduce exposure on strength up to $28.46 with risk defined on close above $31.87, targeting $22.94 and $17.42 price levels.

Given the present circumstances, it shouldn’t be surprising that Twitter announces layoffs. A layoff did recently emerged when a source told Re/code that the management was mulling reducing headcount. Twitter’s best hopes would be to get acquired by either Alphabet Inc (NASDAQ:GOOGL) or Facebook Inc (NASDAQ:FB).

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