Twitter (N:TWTR) is having a rough time in the market as of late, and it's generating quite the conversation. On the bullish side of the equation, investors are arguing that we've hit bottom and that we will see the stock climb from here. On the bearish side of the equation, the argument is that TWTR has not reached anywhere near bottom quite yet. Personally, I have to say that I'm on the bearish side of the equation. Today, we'll talk about both sides of the argument and why I think the bears are hitting the nail on the head with TWTR.
The Bulls Believe Twitter Will Climb From Here
The bulls have a relatively simple argument when it comes to TWTR. They argue that the social network has a large amount of users and has proven to be able to grow revenue quarter over quarter. Therefore, they aren't concerned about the poor user growth on the social network. On top of that, they believe that the recent and massive declines in the value of TWTR have brought the stock down to an incredibly appealing price and that it's likely to have hit bottom already. So, the bulls are expecting to see heavy support on Twitter and growth to come. However, I have to say that the bulls are sorely mistaken. Let's get to the bearish argument shall we...
The Bears Believe The Bottom Is A Long Way Off
While the bulls have a relatively valid argument, the argument on the bearish side of the equation seems to trump the bullish argument. The reality is that TWTR has been struggling with poor user data for quite some time now. Unfortunately, the company just can't seem to drive new users in and retain them as long-term users on the network. Believe it or not, this problem has been going on for quite some time now. In fact, in 2015, investors called for the resignation of the CEO at that time, Dick Costolo, and they got what they wanted.
After the resignation of Costolo, Jack Dorsey, the co-founder of TWTR stepped in as the interim CEO of the company while they searched for someone to take Costolo's place. However, Twitter needed a CEO with a strong history, and let's face it, what quality CEO is going to jump on a sinking ship? Unfortunately, TWTR couldn't find anyone, so Jack Dorsey stepped in as the long term CEO of the company. This was a big mistake.
You see, Jack Dorsey has held the role as CEO of TWTR in the past. Unfortunately, he didn't do very well, and 2 years in, he was fired. This time around, I'm not expecting to see results that are much better. The reality is that Dorsey doesn't have the time to devote to Twitter at the moment. He is also the full time CEO of Square (N:SQ), a company that went public relatively recently. Between the two, he's going to have to lack focus on one, and I believe that to be TWTR.
To give you an idea of what we can expect, just look at what we've seen. Dorsey has been in control off Twitter for several months at this point. While we've seen new features for advertisers, we've seen very little by way of attempts to solve the primary problem, user growth. Ultimately, Dorsey and TWTR as a whole lack direction, and that will lead to further declines on the stock.