Must-know: Why Twitter stock continues its steep decline



Twitter stock’s steep decline is nothing new

In the previous part of this series, we discussed why the U.S. market—especially the tech sector—underwent a steep decline yesterday, on July 8. We also touched upon the performance of Internet stocks, which suffered a far steeper decline.

Twitter’s (TWTR) stock fell 7% to $37 yesterday. But this isn’t the first time this stock saw such a sharp decline. The stock fell 12% on the day Twitter announced its Q1 2014 earnings in April 2014. The stock again fell, by 18%, on May 6. Many Twitter shareholders were allowed to sell their stock in the open market after a lock-up period ended. Yesterday’s fall meant Twitter’s stock has lost about 50% in value since touching highs of $70 in December last year.

2014.06.12 - Twitter User Growth

Twitter’s user base isn’t growing fast

Twitter’s sequential user growth has slowed in the past four quarters, as the above chart shows. It’s now growing at a single-digit rate. Plus, Twitter’s worldwide monthly active users of 255 million is tiny compared with the 1.28 billion monthly active users for Facebook (FB).

According to a report from Facebook, by the end of its fourth year of operation:

  • WhatsApp had 419 million users
  • Facebook had 145 million users
  • Google’s (GOOGL) Gmail had 123 million users
  • Twitter had 54 million users
  • Microsoft’s (MSFT) Skype had 52 million users

This means Twitter hasn’t been able to scale up fast enough compared to its competitors.

Too much executive shuffling isn’t helping the company

There have been too many changes in Twitter’s management. And the changes have been pretty quick.

Last month, Twitter’s number-two executive, Ali Rowghani, resigned as chief operating officer. Then, Twitter’s vice president of Media, Chloe Sladden, resigned. Then recently, Anthony Noto, an ex–Goldman Sachs (GS) banker, replaced Mike Gupta as chief financial officer.

These changes in senior management happened within less than a year of Twitter’s IPO. This suggests all is not well with the company.

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