When a company is struggling to hold on to customers or find ways to eke out revenue, you'll often see it begin to release news of adjustments or pivots in its business model, replete with claims that the new strategy will turn things around.
I've seen this time and time again in recent months, and it can be difficult to determine whether these are true buying opportunities for companies on the cheap or signs of a failing stock rattling off comforting words.
Recently I received an interesting question from a Money Map Report reader, Jack, that gave us a great example of this. The stock was as high-profile as they come, Twitter Inc. (NYSE: TWTR).
Jack asked, "Twitter's going to advertise shopping goods so you can buy while you Tweet; is it time to recommend the stock?"
An astute question, but my answer is an unequivocal no.
The Short That Keeps on Giving
I first brought Twitter to the attention of my readers as a short candidate in my 2014 outlook, when it traded at nearly $70 a share. I've re-recommended the short several times since.
This is a clear example of a move that looks a lot less like something from a strategic playbook and more like a "Hail Mary." Management is throwing everything it can at the proverbial wall to see what sticks.
It's not as though Twitter has a lot of room for "awareness" growth. More than a billion people have tried Twitter and left. This is a platform that has already been saturated, and I believe it's in the process of dying out.
Twitter has also demonstrated time and again that the company is unable or unwilling to control the tone of the conversation that it enables. It has become an online venue for negativity and "trolling." Advertisers have figured this out, and I think very few are going to want to spend money risking their brand, let alone their revenue.
At the same time, advertisers have started getting over their "fear of missing out" on the promise of social media marketing, and reality is setting in. The results are in, and it's becoming clear which social media spaces work for advertisers and which ones fall short.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.