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After opening on Jan. 20 at an all-time low of $16.16, the TWTR stock price climbed 10.39% to close out last week at $17.84 per share.
But the Twitter stock price rally is over, as the stock is down 4.5% in intraday trading today (Monday).
The drop came after CEO Jack Dorsey announced on Twitter Inc. (NYSE: TWTR) Sunday night that four executives were leaving the company. And the departures underscore a major problem with the company…
Dorsey fired roughly 9% of Twitter's workforce in October. But Dorsey has repeatedly made it sound like executives are leaving voluntarily.
And that includes today's departures:
- Engineering Chief Alex Roetter
- Product Head Kevin Weil
- Human Resources Vice President Skip Schipper
- Media Head Katie Stanton
Twitter also lost the General Manager of Vine, a video-sharing service that Twitter bought in 2012. Jason Toff announced in a tweet on Sunday night that he was joining Alphabet Inc. (Nasdaq: GOOGL, GOOG) to work on virtual reality.
The mass exodus is the reason the TWTR stock price is falling today, but the problem is bigger than a 4% drop in the stock.
This places a huge shadow over the company. And it points to a bigger picture that many on Wall Street haven't picked up on…
The Biggest Factor Behind the TWTR Stock Drop
You see, Twitter has been very proactive over the last few months in two areas: innovating and cutting costs. It's been striving in those two areas because it's likely its 2015 Q4 earnings report on Feb. 10 will disappoint investors.
Twitter hopes that cutting 9% of its workforce will boost profitability. It also hopes removing the 140 character limit on tweets will show innovation.Twitter has made these moves in a premeditated attempt to satisfy shareholders and show that the company is moving in a positive direction.But that's just a distraction. As we've been pointing out for months, the biggest factor that will continue to move the TWTR stock price is monthly active user (MAU) growth…
Wall Street places a huge emphasis on MAU growth. That growth means Twitter increased its audience size, which makes it more attractive for advertisers.
But Twitter has struggled to grow its user base, which has caused the Twitter stock price to drop 56% in the last 12 months…
In its Q3 2015 earnings report, Twitter announced that it had a total of 320 million MAUs. Rival Facebook Inc. (Nasdaq: FB), on the other hand, reported 1.55 billion MAUs.
Twitter will never be able to catch up to Facebook's user total, but it is also falling behind Facebook's photo app Instagram. All the way back in September, Instagram surpassed Twitter in MAUs with 400 million.
And to place even more pressure on Twitter, Facebook will be reporting its earnings first. If Facebook reports a significant growth in MAUs, Twitter shareholders will obviously want to see the same type of user increase.
The TWTR stock price is trading lower today, and it could fall even further after earnings if MAU growth continues to disappoint.
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