• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Technology

Avoid Twitter Like the Plague; It's Uninvestable

If Twitter puts up a dreadful quarter, shares will sell off again.
By BRIAN SOZZI Oct 14, 2016 | 10:00 AM EDT
Stocks quotes in this article: AA, ILMN, TWTR, CRM, DIS, AAPL

With markets proving more volatile as the election and the next Fed meeting near, it's time to heavily scrutinize every single thesis underlying the stocks in your portfolio. That is especially true in light of the market's harsh reaction to brutal earnings-related news from big-name companies such as Action Alerts PLUS name Alcoa (AA) , Illumina (ILMN) and a couple of restaurants.

On that score, if Twitter (TWTR) happens to be one stock in the old portfolio, now is the moment to ask simply: umm, why? Why have you chosen to try and trade the the name based on the prospect for an offer from Salesforce (CRM) , Disney (DIS) or some Chinese company that has yet to emerge? Why do you believe Twitter's future is bright and so close to finally being reflected in the stock price?

The answers to all of these questions, at least from a rational person's point of view, should be that Twitter is one of the most uninvestable companies in the entire stock market (excluding penny stocks, of course) right now. Shares should be sold, with the funds dumped into an Apple (AAPL) that will enter the holiday season with a host of premium-priced new products and a major competitor in Samsung that is absent a key product (and the type of news flow that may impact sales of its TVs, refrigerators, etc.).

Here is a basic checklist on why Twitter needs to be avoided like the plague ahead of its earnings report later this month:

Unknown Twitter Culture

Tech companies thrive on their people. These are bright folks who basically get paid handsomely to have no life, sitting around coding and discussing ideas in the fancy company lounge literally around the clock. The pace of change in tech is very rapid, so it's essential to have the best and brightest in the trenches each and every day, with a burning desire to kick ass.

By all outward indications, Twitter's culture has been ruined by constant talk of a sale, key executive turnover and stale financial results. Nothing gets techies down like sustained poor results; it makes them feel worthless.

Ultimately, the fact Twitter CEO Jack Dorsey had to send out a rallying cry email this week to employees is quite telling as to the state of the company's innards. It's reasonable to expect an exodus of talent within the next six months, which in turn could further impact product reinvention goals and efforts to jumpstart stalled user growth.

Look at the Price Action

The market is saying two things on Twitter at the moment, both of which point to a state of concern regarding the company. First, the company has proven that's its future isn't as bright as execs try to persuade people to believe. Twitter went public in 2013 at $26 a share, quickly jumping to over $45 on the first day of trading. As rumors of a sale swirled last month, shares rebounded to about $24 - still below anything printed by news organizations on that first day of trading.

The read here is that any formal bid for Twitter may be disappointingly low, given concerns about its future. And Twitter execs realize any formal offer will be of the lowball type and are holding out for that one great quarter that they can take to a suitor and say the turnaround is imminent. Unfortunately, that quarter is unlikely to come soon, so execs have created an unsavory situation for investors.

Secondarily, since the deal talk has quieted down, shares have dropped back to $17.80 and are now down about 40% over the past year. The market has returned its focus on Twitter's near-term performance, voicing an opinion that the third quarter will likely show meager sequential and year-over- year revenue growth. Meanwhile, the bottom line will still be ugly and user growth tepid at best.

If Twitter puts up this type of dreadful quarter, it will likely set off another steep selloff as investors question the company's viability, potential need to raise should it choose to stay public and the harsh reality that the company's general state of ugliness will keep suitors on the sidelines.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Investing | U.S. Equity | Technology | Markets | Earnings | Stocks

More from Technology

Bearish Bets: 3 Stocks You Should Consider Shorting This Week

Bob Lang
Jul 3, 2022 10:30 AM EDT

These recently downgraded names are displaying both quantitative and technical deterioration.

The Charts Point to More Selling Ahead for 4 Former Tech Leaders

Ed Ponsi
Jul 1, 2022 10:00 AM EDT

Keep in mind that no matter how much a stock has fallen, it can always go lower, and it appears these four stocks could prove that point.

Want to Save Your Retirement Fund? Tune Out the Talking Heads

Jim Collins
Jun 30, 2022 3:14 PM EDT

The first half of this year has been ugly. But we could have seen what would happen to Netflix, Tesla and Meta...

Is Pinterest's CEO Change Good News? It Depends on How You Look at It

Eric Jhonsa
Jun 30, 2022 2:30 PM EDT

Plus, why a report about an Apple 5G modem setback sounds believable.

Barring a Major Recession, Some Chip Stocks Look Very Cheap Right Now

Eric Jhonsa
Jun 30, 2022 11:45 AM EDT

Many quality chip stocks now seem to be pricing in a massive downturn, rather than just a typical down-cycle.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:34 AM EDT PAUL PRICE

    A $525,000 Vote of Confidence on Macerich (MAC)

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • 07:59 PM EDT PAUL PRICE

    Very Good Quarterly Numbers From Bassett Furniture (BSET)

    Bassett Furniture blew right through analysts es...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login