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 Twitter's shares have lost more than two-thirds of their value in
the past 12 months and hit a record low of $14.32 on Tuesday. The
shares were up about 2 percent at $14.70 in premarket trading on
Wednesday.
Several tech stocks with lofty valuations have plunged in the past
few days after dismal sales outlook from LinkedIn Corp and
business-analytics company Tableau Software fueled growth fears for
the entire sector.
"I think the problem is that in the current market any sign of a
weak outlook will be quite harshly punished," Atlantic Equities
analyst James Cordwell said.
Investors want to see Chief Executive Jack Dorsey's strategy to
reignite growth in user numbers.
Twitter reported an 11 percent growth in active monthly users in the
third quarter to 320 million, the slowest growth since the company
went public in 2013.
But one effort, Moments, which showcases Twitter's best tweets and
content, has failed to take off as expected, analysts have said.
Twitter is also planning to reorder tweets to prioritize those it
believes more users will want to see, BuzzFeed reported on Friday.
Many users decried the reported plan, with the hashtag #RIPTwitter
becoming the top trending U.S. item on Twitter on Saturday.
Twitter has been criticized for trying to become more like Facebook
Inc, which has been growing at a much faster rate and reported 1.59
billion active monthly users in January.
"We expect only modest sequential user growth (for Twitter) in 2016,
likely 1 percent per quarter," Wedbush Securities analysts wrote in
a preview note on Friday.
Analysts expect Twitter to report earnings of 12 cents per share on
revenue of $709.9 million, according to Thomson Reuters I/B/E/S.
JACK OF TWO TRADES
Another lingering concern has been Dorsey's dual role of running
Twitter as well as mobile payments company Square Inc.
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Dorsey, who became interim CEO in July and then CEO in October, has
called for "bold rethinking" about the company but has not yet
clarified what that means.
Dorsey has also moved to restructure the company by laying off more
than 300 employees and making marquee hires, notably that of former
Google executive Omid Kordestani as executive chairman.
But four senior executives have quit the company in the past few
months, adding another concern about the company's ability to
restart growth.
"We believe that had Moments been an early success, the executives
would not have left so soon, voluntarily or otherwise," Wedbush
analysts wrote.
As of Monday, Twitter shares were trading at 25.7 times forward
earnings, shy of Facebook's 30.4.
"Why would you invest in something like a Twitter when Facebook is
on a similar valuation with a stronger trajectory - that's the kind
of questions investors are asking," Cordwell said.
(Reporting by Supantha Mukherjee and Abhirup Roy in Bengaluru;
Editing by Saumyadeb Chakrabarty)
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