Twitter’s share price is getting pummeled in 2016 and Stifel analyst Scott Devitt believes the company should have been a “sell” call all along.
In a note to investors on Wednesday he made his thoughts known when he changed his position from “hold” to “sell.”
“We are returning our rating on Twitter shares back to where it should have been all along — Sell,” Devitt wrote while comparing Twitter to tech fads that have imploded before.
Devitt points out that 320 million active users (MAU’s) is a paltry sum compared to many of today’s already established social networks and other content driven networks.
For example, Yahoo’s valuation is much lower than Twitter’s, but it has more than 1 billion MAUs.
AOL sold to Verizon for billions and with an established 200 million active users.
It gets worse for Twitter as Devitt compares the company to Groupon and Zynga, two former tech darlings that are now trading below $3 per share.
“Although these companies are not at Twitter’s scale, both still have ~50mm ‘users’ and once had many more,” the analyst said. He also believes Twitter user numbers may start to decline.
“Twitter is a product that has never fully developed into a sustainable public company due to either poor strategy, poor execution, or that it was never destined to be one,” the analyst said.
As Business Pundit recently reported, four of the company’s top executives recently announced that they were leaving the company.
Twitter’s biggest recet success came in 2015 when it debuted the well-received Moments feature. While users are now able to get some of the day’s biggest news stories and trending events from that portal, the company has done little to promote Moments or extend its capabilities.
Twitter is also starting to feel more pressure from the likes of Snapchat, which has attracted an increasing number of users via its Stories platform and constantly evolving features set.
Twitter in the meantime will reveal its Q4 financials on February 10. Investors will be looking for any positive signs from that report. If nothing materializes the company’s shares are likely to continue with their free fall well into 2016.