Twitter CEO: The Buck Stops Here!

The Newly Elected CEO of Twitter Purges Hundreds of Workers The decision to elect Jack Dorsey as the permanent CEO of Twitter has come at a cost for 336 employees of the company. Twitter has been facing increasing uncertainty from shareholders and within its own ranks as to its future strategic direction. Now that Dorsey has been elected to the top position in the company, he is determined to turn its fortunes around with multiple cost-cutting initiatives. These include a suspension of plans to expand the company's headquarters in San Francisco, and mass layoffs of some 8% of the company's workforce. Many analysts are of the opinion that Twitter has grown too large, and as a result is sluggish and unprofitable in its current form. The company currently employs some 4,100 people in an estimated 35 company offices. These cost-cutting measures are designed to streamline operations and restore investor confidence in this social media giant. Jack Dorsey is one of the founders of Twitter, and his appointment to the CEO position has been strongly endorsed by the board.

Performance of Twitter Stock on the NYSE Twitter is currently trading at $29.45 per share, up 2.23%. The 1-year target estimate price for the stock is $38.23, and at the current share price the company has a market capitalisation of $19.82 billion. Owing to weak performance of late, the earnings per share is -0.95 and there is no price/earnings ratio applicable to the stock. In terms of upgrades and downgrades, research firms initiated upgrades of Twitter stock on 2 occasions since August 2015, including the following:

  • Monness, Crespi & Hardt upgraded Twitter from neutral to buy on August 10, 2015
  • Sun Trust Rbsn Humphrey upgraded Twitter from neutral to buy on August 31, 2015
The mean recommendation for Twitter stock this week is 2.4, which is closer to a strong buy than it is to a sell on a rating scale where 1.0 is a strong buy and 5.0 is a sell. Twitter is struggling to increase its revenues, and the layoff of 336 people is an attempt to stop the hemorrhaging in the company. User growth has slowed down tremendously for Twitter, while Facebook and other social media giants continue to grow at a healthy rate. The IPO price for Twitter was $26 in 2013, but bearish sentiment about the stock has caused it to lose value, at one point falling below the IPO price.

User growth continues to be one of the biggest problems that Twitter is facing, especially as new social media products enter the scene. These include Snapchat, WhatsApp and Instagram among others. Twitter may also be compelled to divest from non-essential business activities in order to boost profitability and steer the company in the direction that Dorsey wants to go. Twitter has expanded rapidly over the past 2 years, and has grown fat in the process. In Twitter's last financials, the company costs totaled $633 million (a 37% increase year-on-year).

No San Francisco Expansion Plans for Now In addition to job cuts, Twitter has also put its 100,000 ft.² expansion plans on ice. Twitter's global headquarters in San Francisco will not be the scene of additional office space, until the company turns its financial fortunes around. The company has enjoyed increased investor support with the appointment of Jack Dorsey, with a 14% spike in the share price between Monday-Friday, during the first week of October. Naturally, plans to eliminate jobs did not go down well with shareholders and the share price retreated.

Twitter has several ambitious plans in the pipeline, such as ‘Moments’ which features the latest headlines for big events that are now being discussed on Twitter. Jack Dorsey is certainly a man on a mission and his recent appointment as permanent CEO has seen him implementing a series of decisive measures to take the proverbial bull by the horns and turn the company's fortunes around!

Author:.

Brett Chatz is a graduate of the Economics and Management Faculty of UNISA University (South Africa) and he completed post-graduate studies at the University of Haifa. He is a published author (Serum), financial columnist & cricket writer. Nowadays, Brett writes didactic financial pieces for the UK based spread betting provider, InterTrader.com.

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