On June 11, Twitter Inc. (NYSE: TWTR) CEO Dick Costolo announced that he will be stepping down from his position starting on July 1. This move comes after months of complaints from Twitter (NYSE:TWTR) investors regarding Cotolo’s leadership. Twitter co-founder Jack Dorsey will temporarily step into the role of CEO until the board brings on a new replacement.
Investors began to question Costolo when he sold all of the Twitter shares in his family trust between July and December of last year. Although he still had shares issued in his own name, investors assumed Costolo did not believe in the company.
Investors have also blamed Costolo for Twitter’s ongoing deceleration of user growth and lack of innovations on its platform. Twitter’s user growth continues to slow down quarter after quarter and investors can’t help but compare it with Facebook’s rapidly growing users. Costolo has tried to discourage investors from comparing the two social media platforms to no avail. Additionally, Twitter has hardly had any new features on its platform since its initial public offering and investors blame Costolo for putting his focus elsewhere.
Although Twitter’s revenue increases every quarter, this is overshadowed by the fact that the company has yet to turn over a profit, which investors blame on Costolo. Despite all the negative criticism from investors, Dick Costolo was very well liked among Twitter employees and the board. He led Twitter to its successful IPO in November 2013, which instantly jumped 73% on its first day of trading. Dick Costolo will remain on Twitter’s Board.
On June 15, Nomura analyst Anthony DiClemente maintained a Neutral rating on Twitter in light of Dick Costolo’s departure. The analyst noted that Dick Costolo’s departure “follows a number of departures of key Twitter personnel and comes amidst a period of uncertainty regarding Twitter’s user growth and ability to monetize at scale.” Additionally, the analyst sees “a number of potential positive catalysts” in the near term, “including the launch of the Google (NASDAQ:GOOGL) DoubleClick partnership as well as the continued rapid growth of Periscope.” Overall, Anthony DiClemente has a 64% success rate recommending stocks and a +8.2% average return per recommendation.
Similarly on June 12, Sterne Agee analyst Arvind Bhatia reiterated a Neutral rating on Twitter, highlighting Costolo’s inability for the company’s “user growth and user engagement” to meet expectations. The analyst expects “user growth to remain weak in the near term” and believes “addressing this issue will be job #1 for the company’s future CEO.” Arvind Bhatia currently has a success rate of 62% recommending stocks and a +27.1% average return per recommendation.
On average, the top analyst consensus for Twitter on TipRanks is Hold.