Twitter Inc. (NYSE:TWTRC) can’t seem to catch a break. The company is mentioned multiple times daily in news accounts about President Donald Trump’s frequent use of the platform and yet the publicity hasn’t resulted in sales growth – at least not yet.
Twitter stock was down more than 12% Thursday on a day when the Dow went to 20172, up 118 points. The S&P 500 added 13.2 ending at 2307 and the Nasdaq closed at 5715 after gaining almost 33 points. This after President Trump signaled he would announce a plan to lower taxes soon, sparking the market rally.
Slow Revenue Growth
The company Thursday reported a 10th straight quarter of tepid growth and indicated it planned to try to cash in on all the attention it has been receiving. Twitter did say that it expected there to be a lag between the recent publicity and any sales growth to take place.
Chief Executive, Jack Dorsey noted during an earnings call that, “The whole world is watching Twitter.” He added, “While we may not be currently meeting everyone’s growth expectations, there is one thing that continues to grow and outpace our peers: Twitter’s influence and impact.”
Ads Don’t Match Consumption
One problem, according to Wells Fargo analyst Peter Stabler, is that Twitter’s ads don’t work with the way Twitter users consume content which he called, “fast twitch consumption.”
It’s also been noted that Twitter’s ad format doesn’t match the platform’s increasing emphasis on video including live broadcasting. Users, it turns out, skip the ads and promoted tweets in order to get to news and commentary.
As noted earlier Twitter shares dropped more than 12% Thursday ending at $16.41, down $2.31 on the day. The company projected adjusted earnings before interest, tax, depreciation and amortization at $75 million and $95 million. This was well below the $182 million analysts expected.
Twitter, despite the fact it has posted net losses every quarter since going public, reiterated its goal of moving toward profitability this year.
Front Office Shuffle
Some investors believe Twitter’s problems could be solved if Dorsey, who is also CEO of Square, would concentrate on Twitter alone. This has led to talk of a front office shake-up, something UBS analyst Eric Sheridan thinks would be a mistake.
Sheridan believes bringing in new leadership at the same time Twitter is competing with the likes of Alphabet Inc.’s (NASDAQ:GOOGC) Google and Facebook Inc. (NASDAQ:FBC) for digital ad dollars. According to RBC Capital Markets analyst Mark Mahaney, “The problem is probably going to intensify.”
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Facebook vs. Snap vs. Twitter
As Snap positions itself to be the next Facebook and not the next Twitter, analysts differ on whether that is true or not. This matters, not only to Facebook and Snap but to Twitter as well. After all, nobody wants to be downside in a 3-way comparison. Right now that’s Twitter’s lot.
If Twitter succeeds, Snap may be heartened. If it fails, the comparisons will continue. With Facebook up 250% since going public and Twitter shares down 60%, it’s easy to see why Snap wants to be the new Facebook. For now, at least nothing is set in stone.