3 Reasons Twitter’s Stock is Down 30% on the Year

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Twitter Inc.’s (TWTR) stock has plummeted 30% since the start of 2016, leaving investors weary of the social media giant despite CEO Jack Dorsey’s attempts to turn the company around. Twitter’s problems are not necessarily new, but stagnant growth has opened the eyes of investors that see the company is losing money and the interest of users.

The main factors behind the company’s stock tumbling are:

1.     User Growth is Flat

Twitter had a major boost in revenue year-over-year in fiscal Q4, with revenue growth of 48%. But a lack of user growth has been a major reason for the decline in investor sentiment. Growth remained stagnant compared to the third quarter.

2.     Stock-based Compensation is Less Viable

The company has been able to bring in talented members by offering stock-based compensation. Retaining talent is difficult for the company, and news in March indicated that the company offered stock and cash bonuses as a way to entice employees to stay with the company.

Falling stock prices make this a less attractive reason for employees to stay with Twitter.

3.     Revenue Came Up Short in Q1

The company added 5 million users in the first quarter of the year, which was a major addition over the previous quarter. Revenue guidance was below analyst expectations, which led to the company’s stock suffering even more.

Twitter states that brand marketers are spending less, which is the reason behind the lower-than-expected guidance.

4.     Executives are Leaving Quickly

The year started with numerous executives leaving the company, putting a big question mark on the future of Twitter. In May, more executives left the company. The company’s head of business development, Jana Messerschmidt, and Nathan Hubbard, head of media and commerce, both announced their plans to leave the company in May.

The departing executives put further stress on the company. When tied with a $438 million GAAP net loss on revenues of $2.4 billion in the trailing 12-month period, it’s clear to see why investors are unloading Twitter stock.

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