Why I Changed My Stance on Twitter

As my readers would know, I recently recommended buying Twitter (TWTR) when it was trading just over $16. I was bullish on the stock for technical reasons and also saw potential in Periscope. The stock jumped to around $20 in the following few weeks, which is when I reversed my call and recommended investors to sell the stock. I wanted investors to lock in the gains, which is why I turned bearish on the stock. The stock has given back all of its gains since my sell recommendation.

In the long-term, I do think Twitter has a lot of potential.
However, I wouldn’t recommend investing in the stock because of the company’s terrible management. Over the years, I have recommended shorting many companies that have terrible CEO’s, and Twitter was one of them. Other included the likes of GoPro (GPRO), SunEdison (SUNE), etc.

All in all, I think investors should stay away from companies that have bad CEOs and Twitter is one of them. So, while the company has a lot of potential, it may never achieve the greatness due to the inability of its management.

Jack Dorsey was reappointed as Twitter’s CEO last year after being sacked. The arrival of Dorsey brings more bad than good as he has a proven record of failing. Dorsey has been unsuccessful in monetizing Twitter’s true potential and I don’t think this trend will change any time soon.

There’s no reason to believe that Dorsey will turn Twitter around. Under his leadership,  I can see Twitter’s potential getting destroyed, which is why I think investors should now stay away from the stock and watch it from the sidelines. Despite the countless efforts, Twitter is still losing money and its potential is being wasted.

For me to consider Twitter a great long-term investment, I would have to see a drastic change in the company’s board, which, as of now, seems unlikely. Thus, as much as I like the website and the stock, I think Twitter is not a good investment now.

Conclusion

Twitter may be trading at a seemingly cheap valuation, but investors should never under estimate the risks of an incompetent board. Companies like SunEdison, GoPro and others have surprised investors with their ability to continue moving lower and I believe Twitter falls under the same category. While I am not saying Twitter will not move higher, I think the risk/reward is unfavorable, which is why I think investors should watch the stock from the sidelines.
Published on Mar 31, 2016
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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