Twitter Remains Unsettled

 | Jul 02, 2014 | 1:00 PM EDT  | Comments
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Twitter (TWTR) made a great hire in Anthony Noto yesterday. I was always a big fan of his research when he was a rock star Internet analyst for Goldman Sachs back in the day.

He was intimately involved with the Twitter IPO that really went off without a hitch and launched the stock into the stratosphere -- at least for a while.

He will bring a lot to that management team. But let's not kid ourselves, this is still a management team struggling to find itself.

I heard someone on Bloomberg Radio asking what Noto would do to help turn around Twitter's sluggish user engagement issues. I chuckled to myself. This is a CFO here. No CFO anywhere would be able to help on that kind of issue.

Many have said that Noto will help Twitter better communicate with Wall Street. While that's true, I'd have to say that Twitter has certainly got the benefit of the doubt from Wall Street until now. It's not like the stock is trading at 2x trailing sales. It's trading at 30x trailing sales.

Wall Street has big expectations for what revenue growth is soon to come from Twitter. Is Noto going to improve that? He already helped communicate that back in the IPO roadshow in November.

Nothing has really changed in terms of Twitter's problems: no sign of how to improve user growth, slow international growth, no play in the hot messaging market.

And now Twitter has another issue: a lot of turned over executives on the team. But are they going to do anything differently? It's really hard to see much of a change in the Twitter product over the past few months since Daniel Graf came aboard.

With all this said, I still think Twitter's stock is more likely to go up in the short term than down. It should have good World Cup-induced engagement numbers for second quarter to trumpet. But what happens after that? Twitter hasn't really cracked the code on engagement.

The stock got oversold when it dropped from $74 to $30. It's bounced back well and can probably keep going a little while longer, but I think that Twitter is stuck in no man's land for another couple of months.

I covered my short at $33 and will now wait. I hope it keeps going back to $50. I would then be interested in shorting it again as the heat turns up on management to show results in the second half of this year. I remain skeptical.

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