Twitter: When in Doubt, Bring Dorsey Out
Not all decisions on whether to buy a stock have to be based on hours upon hours of research.
Instead, one would be surprised how a little bit of common sense often is the best approach to successful investing. And this tidbit of epic wisdom brings me to the social media pioneer Twitter (TWTR). Has anyone else noticed the activities at Twitter this month? For the first time, Twitter founder and CEO Jack Dorsey is being brought out of the darkness of coding and strategy rooms to be introduced to the society around the globe. This is mostly a function, I think, of Twitter’s new vice president of communications Natalie Kerris, a former (and powerful) worldwide senior communications person at Apple (AAPL). (Twitter and Apple are part of TheStreet’s Action Alerts PLUS portfolio.)
Dorsey has appeared — beard and all — on the cover of Bloomberg Businessweek. In the long-form piece, Dorsey lays out a compelling vision for Twitter. He loves all things live and one should expect considerable investment in Periscope (ahem, earnings risk). We even got to know more about Dorsey on a personal level. He is obsessed with the Golden State Warriors basketball team and takes inspiration from them, when trying to develop his own leadership team. Makes sense, I would do the same. I even sense Dorsey, for now, would be able to channel his inner Steve Jobs and run two public companies (the short distance between Twitter’s and Square’s offices is rather helpful).
The Bloomberg piece came on the heels of Dorsey walking around an urban area while appearing on CNBC. As he waxed poetic on the long-term potential of Twitter and pulled back some of the veil on Dorsey the human being, he sipped coffee and visited some of the locations that use Square.
Dorsey’s appearances have coincided with Twitter sharing information about its live broadcasting app Periscope, which has hosted 200 million broadcasts over the past year. And in the past three months alone, Periscope users have created 100 million of these broadcasts. Twitter, however, is still not directly monetizing Periscope, so not sure how amazing this data is to investors. Tweeting tech geeks will eat it up. Twitter even celebrated its 10th birthday this month, not too shabby in the brutally competitive world of social media.
Through these appearences, have I enjoyed getting to know a bit more about the 39-year-old Dorsey? Absolutely. We aren’t too far apart in age, and I indeed respect what he has created in fueling change on a global scale with Twitter’s platform. I even like the way he dresses (almost like James Dean meets Silicon Valley tech hipster). But here is what concerns me from an investment standpoint.
These high-profile appearances, almost out of the blue for the often keep-to-myself Dorsey, have arrived weeks before Twitter reports its first quarter. And yet, the stock has barely budged. Actually, let me be more precise: The stock has fallen 16% this month. That is not the type of reaction the Twitter team was likely looking for, when it trotted Dorsey out for some very prominent interviews.
A big thinker such as Dorsey is supposed to inspire the masses — both institutional shareholders and millennials who are hooked on Twitter and want to buy what he or she knows. With the stock in the doldrums, this was Dorsey’s time to rejuvenate shareholders on Twitter’s short-term and longer-term prospects. Think about the power of Steve Jobs to pump up Apple’s stock back in the day with a presentation or interview.
Instead, I think Dorsey’s interviews reinforced that the market is no longer charmed by Twitter. Investors want to see improvement in the company’s stagnant monthly user numbers and hear Twitter begin to deliver a clear path to profitability. Twitter has never been profitable. In fact, putting Dorsey in the public eye before the quarterly results are announced may concern the market. Investors may think Twitter’s user base and level of engagement is showing little to no improvemen on a quarter-over-quarter basis, despite improvements to its Moments and making its timeline easier to read.
All I could hope for after penning this is that Twitter doesn’t wipe out all my highly engaged 10,243 users and retract my verified status. Oh, and that you don’t get #burned by trying to pick the bottom in Twitter.