Twitter Slides After Report of Potential Layoffs
October 12 2015 - 12:20PM
Dow Jones News
Twitter Inc.'s stock is stumbling amid news the company is
thinning its flock.
Shares of the social media firm are off as much as 6.8% Monday
following a report by Re/code Friday after the market closed that
Twitter is planning company-wide layoffs set to take effect this
week.
A Twitter spokesperson said the company was not "commenting on
rumor and speculation."
Citigroup Inc. analyst Mark May said the news is a reminder that
the company has a long way to go--and investors appear to
agree.
"While we can think of both positive and negative investor
takeaways from this news, we believe it primarily is a reminder
that much work and possible near-term disruption will be required
to achieve the type of long-term improvements hoped for by
management, the board, and by investors," said Mr. May.
"It's possible that any cuts also reflect continued near-term
business challenges in terms of user growth, user engagement, and
monetization."
The job cuts--which are reported to likely affect most, if not
all, departments--would come as Twitter's stock has fallen 20 %
this year amid an executive reshuffle, slowing user growth and
declining ad-sale projections. Its loss compares to a 2.1%
year-to-date decline for the S&P 500.
Citi cut its price target on Twitter's stock to $30 in
September, a week and a half before Jack Dorsey was named permanent
CEO. At the time, Mr. May said that it was going to be difficult
for the company to achieve sustained multiple expansion until user
growth speeds up or revenue growth stabilizes. The bank has a
neutral rating on shares, with a "high risk" classification.
For Twitter, job cuts could help the company's adjusted EBITDA
margins, which were 24% in both the first and second quarters –
"well below" most of its peers, according to Citi. The bank thinks
that, in order for Twitter to flourish, there needs to be
"meaningful product changes" to drive user growth and
engagement.
Mr. Dorsey will face questions from Wall Street analysts two
weeks from now on the company's earnings call after it reports
quarterly results Oct. 27 after the close.
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(END) Dow Jones Newswires
October 12, 2015 12:05 ET (16:05 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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