Twitter Inc is no longer the Facebook twin/rival that it was supposed to be as the firm continues to sink deeper into miry clay of the bear swamp. Analysts at Magister Advisors, led by Victor Basta, managing partner at the firm have added Twitter to the “Icarus List” of firms that have valuations that is far ahead of fair revenue. Such firms usually end up crashing as they fly near the sun just like the mythical Greek Icarus.
Twitter is the perfect example of a high flyer that might be crashing very soon unless swooped up in a takeover. In Victor’s Basta words, “Market expectation was that Twitter, having created a completely differentiated platform, would accelerate innovation and introduce products and features that would justify a $60+ share price. Disappointingly, innovation for users has largely stagnated. Furthermore, user acquisition numbers have slowed and many sign up and don’t activate.”
Twitter stopped growing only to start dying
Growth has stalled at Twitter has the firm found it increasingly hard to increase its user base beyond the 300M+ MAU range. The 300M+ range might not have been much of a concern but the firm also has issues with monetizing its platform. Then, there is the recent lack of corporate direction as the firm is still looking for a permanent CEO. All these combine to force the downward pressure on the shares of Twitter.
Victor Basta says, “Twitter still has an opportunity to be a successful standalone business but to date it has squandered that opportunity… At $17.5BN Twitter is no longer too big to be acquired. A logical acquirer for Twitter would be from two camps: organisations with larger user networks (Facebook / Google) or a news organisation with an interest in real time data. Both would bring a strategic user-focused discipline to a business.”
Analysts don’t see a bottom yet
The shares of Twitter are trading at an all-time low as the firm drops below its IPO price of $26 per share to somewhere around $24.22 per in yesterday’s session; yet, analysts say that the stock will still fall lower. Trip Chowdhry, a managing director at Global Equities Research says investors should sell Twitter now because the stock “is on life support. You can’t fix it. You need a completely different soul.”
More so, Chowdhry says that the social network boom is ending and that the likes of Twitter might have been left ashore when the boom was lifting the likes of Facebook and LinkedIn. He says “We are nearing the tail-end of Social Networking and eCommerce boom…”
He also believes that Social/eCommerce Stocks (Specifically Names Alibaba, Twitter, LinkedIn) Will ‘ become and start behaving like YHOO stock… i.e. a dead stock“. The shares of Twitter has dropped by more than 20% since its Q2 2015 earnings release on July 28 and no wonder analysts at Magister Advisors think that the firm is now an acquisition target.