Twitter Inc (TWTR) Is Giving Investors the Jitters

For 11 months ending on Oct. 5, Twitter Inc stock (ticker: TWTR) inspired all the excitement of a sponsored content tweet for laxatives. It dipped a total of $1.26, or slightly less than a penny per 140 characters.

Then came news that could well have been named for Twitter's system crash mascot, the "fail whale." In one short week, Twitter stock sank by close to 30 percent; it has not recovered since. It trades at about $18.20 per share, which is about 30 percent lower than this time last year.

The struggle comes, by the way, from a company that actually beat expectations in its most recent earnings report. It generated $616 million in revenue and earnings per share of 13 cents; analysts had expected $605.8 million and an EPS of 9 cents.

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But you'd never know it. That's because Twitter is still reeling from depressing developments, including a 9 percent cut in its workforce and fruitless efforts to find a high-tech suitor much the way LinkedIn Corp. ( LNKD) did when it leaped into the rescuing arms of Microsoft Corp. ( MSFT). The House Bill Gates Built paid $26.2 billion for the networking site in June.

To millions of social media mavens, this may make no sense whatsoever. Doesn't everyone use Twitter? To be sure, it has a user base of 317 million active users a month, a healthy gain from 307 million posted a year ago.

Still no matter its millions of minions, Twitter has thus far failed to monetize those numbers in a way that's impressed Wall Street. Observers call it a textbook example of fumbling the ad revenue ball.

"Twitter's biggest limitation is the quality of data it gives to advertisers," says Steve Andriole, professor of business, accountancy and information systems at the Villanova School of Business in the Philadelphia area. "Twitter should have acquired a social media listening company [that reviews site content] and an analytics company to increase the value of the data it collects -- which would enable higher advertising revenues."

"Twitter's greatest strength has been its limitation," says Cecilia Lynch, CEO and chief strategist at Focused Momentum, a strategy development company. "It is not a full social media company; it is a social media capability. It should leverage its tremendous brand equity and global user base to build out more robust media capabilities and stay true to its self-curated, user-driven news and content."

To be sure, such a tactic could turn Twitter's woes around; one-third of a billion users is nothing to sneeze at. Yet its nagging inability to profitably ride the social media tsunami -- one it helped whip up, no less -- has left analysts largely taking a wait-and-see approach.

In fact, if analyst ratings were a seesaw, Twitter would have a pivot point four times the size of its seats -- literally. A whopping 16 firms call Twitter a "hold," with four labeling it a "strong buy" and three a "sell." Perhaps tipping things in the "saw" direction (as in cutting losses), two more analysts call Twitter an "underperform."

Ultimately, that underperform label may translate to overtaxed. Twitter co-founder and CEO Jack Dorsey hasn't exactly made fans out of investment types, in large part because of his split leadership role.

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You see, Dorsey is also the founder-CEO of Square ( SQ), a company that helped pioneer mobile payments via smartphone and tablet. He's also on the board at the Walt Disney Co. ( DIS), which probably leaves him just enough time to gulp his breakfast smoothie via power-wash hose.

Yet Dorsey's perch at the top may actually serve as a positive, at least compared to what preceded his decision to return as permanent CEO in October 2015.

"On the inside is a workforce that has already withstood a revolving door at the top: five different chiefs over 10 years," says Liz Sara, adjunct professor of marketing and chair of the Dingman Center for Entrepreneurship advisory board at the University of Maryland's Robert H. Smith School of Business.

And when executive turnover spins that fast, "It's no wonder there isn't the clear, consistent vision for growth that we've witnessed at the other tech giants." Sara says. "Now that same workforce is withstanding the pressure of working for a company on the auction block -- and wondering whether they'll still have a job when it's all over."

That said, the proverbial auction block might as well be a cinder block, as no one's showing to bid up the action.

"I think it would be wise for Twitter to make sure its independent strategy is clear, realistic and measurable," says Rob Berick, senior vice president and managing director of Falls Communications, a Cleveland firm that specializes in corporate communications, branding and investor relations.

He adds: "From the outside looking in, it strikes me as a takeover candidate that's seemingly been the bridesmaid for too long."

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For those counting, that's exactly 118 characters. Never has a Twitter-length merger requiem sounded, if you will, so bittertweet.

A former longtime staff writer, editor and columnist at the Chicago Tribune, Lou Carlozo writes about investment for U.S. News & World Report, and personal finance for Money Under 30 and GOBankingRates. He is based in Chicago. Connect with him at linkedin.com/in/loucarlozo.