Will a Management Shake-Up Reverse Twitter Stock's (NYSE: TWTR) 42% YTD Plunge?

Email

Twitter Stock

Twitter Inc. stock (NYSE: TWTR) surged more than 4% Thursday morning on news of Chief Operating Officer Ali Rowghani's resignation.

Rowghani will shift into a strategic advisor role, and Twitter confirmed the COO spot will remain vacant.

One major factor likely behind the management shake-up is the microblogging site's sputtering user growth. A troubling Q1 2014 earnings report on April 29 revealed that monthly active users (MAUs) – the lifeblood of Twitter – were lackluster, with only a 6% gain since last quarter. And the previous quarter saw only a 3% growth in MAUs. The report also showed that TWTR's net loss grew by more than $100 million. Twitter stock fell more than 8% that day.

"The fact that the stock got beaten down [after Q1 earnings release] is not surprising because I think the run-up based on any metric was out of whack," Columbia Business School assistant professor of finance and economics Moshe Cohen said to Slate. "Twitter is a very interesting company, the space is very interesting, but there's still a significant uncertainty and risk as to how to monetize the platform."

In an appearance on FOX Business' "Varney & Co." on Dec. 30, when TWTR was trading for more than $60 a share, Money Morning Chief Investment Strategist Keith Fitz-Gerald predicted Twitter stock was in for a rough ride.

"Customers are leaving in droves, you've got a complex thing they can't monetize, and the next best thing is a click away," Fitz-Gerald said.

Besides a push to improve its numbers, the other reason for the management shake-up is likely Rowghani's loss of favor among Twitter staff.

On May 6, TWTR's six-month lock-up period expired, allowing insiders to sell stock following the company's Nov. 8, 2013, initial public offering (IPO). Re/code reported that Rowghani's sale of 300,000 shares of Twitter stock for $9.9 million in profits that day created severe internal tension – it went against other Twitter insiders' vow not to sell as a signal of confidence about the company's future.

With Twitter stock down more than 42% year to date, the management shake-up is a clear signal that the company is trying to right the ship by sloughing off internal strife and improving user growth and revenue numbers.

Money Morning's tech expert weighed in on Twitter's future – and made a spot-on observation about the market perception of the company right now…

Join the conversation. Click here to jump to comments…

Leave a Reply

Your email address will not be published. Required fields are marked *


× three = 3

Some HTML is OK

© 2014 Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201, Email: customerservice@MoneyMorning.com