Twitter Inc. (NYSE: TWTR) shareholders have had a rough year so far, as the social media giant’s stock began 2016 by plummeting to all-time lows, declining by 4.76 percent to $16.76 in the morning on Monday. According to Benzinga, Global Equities Research’s Trip Chowdhry predicted in an email that Twitter, despite its 232 million users, may become a $5 stock.
Chowdhry implies that the existing markets for social media are stretched thin with the rise of so many new sites and apps like Pintrest and SnapChat. With interest rates rising, moneyed investors may choose to abandon the trendy social media stocks, increasing competition for growth.
This dire prediction may come true as investors have grown increasingly bearish toward Twitter as it struggles with finances and finding new users. Twitter Inc.’s 2015 fourth quarter earnings will be reported after the market closes February 10. The Street reported on its prior quarter earnings.
“During the prior quarter, the total number of users who log into the service at least once a month increased by just 1% to 307 million quarter-over-quarter.”
Wall Street analysts’ predictions for Twitter Inc.’s earnings are not optimistic.
Twitter also confirmed on Sunday that four top executives are on their way out in order to earn back investors’ trust in the company, as reported by The Street. CEO Jack Dorsey has indicated that he plans to eventually replace the entire board.
The departures from Twitter were reportedly voluntary. It seems there are major management changes in store for the social media company. According to The Wall Street Journal, the four executives leaving include “engineering chief Alex Roetter, product head Kevin Weil, human-resources vice president Skip Schipper and media head Katie Stanton.”
Ominously, the Journal also reported that since appointing Mr. Dorsey as CEO, “its stock has fallen 37% to $17.84. Shares hit an all-time low of $16.69 last Tuesday.”
Considering that Twitter is one of the most popular social media sites in the world, the idea that it faces financial hardship and market instability might seem shocking. Nevertheless, the stock price of Twitter has dropped 65.89 percent over the last 200 days (over 23 percent since the start of 2016) and is continuing a strong downward trend.
The reasons for this are manyfold. User growth has been dwindling, advertisers do not see Twitter as a viable option compared to other social media outlets, and cynical crisis-hardened Wall Street investors worry about Twitter’s future with users fleeing to other sites like SnapChat, Pinterest, Facebook and Instagram.
The stock was downgraded to “Hold” by analysts at Stifel Financial after news of the departures broke. The confidence of some investors will likely be shaken by the management overhaul Dorsey is planning. Others, like analyst Gaurav S. Iyer over at Profit Confidential, still remain bullish and strongly defend the marketability of Twitter, advocating that Vine and Twitter have become synonymous.
“Think about it: when was the last time you heard of a service with 300 million users and counting described as a ‘failed product?’ Twitter’s subscriber growth isn’t as strong as Facebook Inc‘s (NASDAQ:FB), but why must all social media companies have to be measured by the same stick?”
Don’t count on the culturally ubiquitous blue bird logo disappearing anytime soon. According to USA Today, Twitter still has $3.5 billion in its coffers and an operating expense of only $8.5 million a year. That’s 412 years of operating capital to fix itself.
The answer to the Twitter’s problems may come with the long-discussed removal of their famous 140 character limit. A larger character limit could potentially revitalize the company’s image to gain relevancy with new users, and allow it to compete with Google, Facebook and Tumblr for advertising dollars.
Twitter may be down for the moment, but analysts contend it’s not out of the fight yet.
[Photo by Andrew Burton/Getty Images]