Twitter Inc. (TWTR) traders bought the rumor and sold the news on Monday, bidding up the stock to a 2-week high after reports that CEO Jack Dorsey would step down and dumping positions aggressively after he announced his immediate departure. The selloff made perfect sense, with Chief Technology Officer Parag Agrawal taking the helm, raising fresh doubts about the company’s ability to translate eyeballs into profits.
Censorship Fears Grow
Public statements that cast doubt about Agrawal’s commitment to free speech emerged within hours, triggering waves of criticism on the platform while stoking fears the organization will develop new censorship tools to silence political opposition and debate about important issues like the pandemic, the economy, and social justice. In addition, Dorsey is leaving behind a string of failed marketing initiatives, camouflaged by election and pandemic-driven user spikes.
Twitter stock has performed terribly since the 2013 initial public offering (IPO) and is now trading less than 3 points above the opening print in that session. Price action translates into an annual return of less than 35 cents per year, highlighting Dorsey’s weak management skills in a booming social media sector. The inexperienced Agrawal is unlikely to make headway on these challenges while he settles into his new position, generating even greater uncertainty for long-suffering shareholders.
Wall Street and Technical Outlook
Wall Street consensus has deteriorated through 2021, now standing at a ‘Hold’ rating based upon 9 ‘Buy’, 1 ‘Overweight’, and 23 ‘Hold’ recommendations. In addition, five analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $47 to a Street-high $86 while the stock is set to open Tuesday’s session nearly $1 below the low target. This dismal placement highlights a chronic disconnect with more cautious Main Street investors.
Twitter topped out near 75 less than two months after coming public and entered a steep downtrend that bottomed out in the mid-teens in 2016. A 2017 uptrend stalled at the IPO opening print in 2018, yielding a secondary decline that posted a higher low during March 2020’s pandemic decline. The subsequent uptick mounted the 2013 high by 6 points before failing in March 2021, ahead of two-legged decline that’s now completed a double top breakdown, projecting downside to the 30 level.