With a new chief executive officer, a broken revenue model and rumored layoffs, few of the new generation of tech IPOs is in more trouble than Twitter Inc. (NYSE: TWTR). Short interest in the stock rose 5.7 million to 46.1 million for the period that ended September 30.
Twitter’s stock price is a confirmation of Wall Street’s opinion. Shares trade at $30, against a 52-week range of $21 to $53. The stock is down 12% over the past three months, while the Nasdaq is close to flat.
Twitter recently named interim CEO Jack Dorsey to the job permanently. According to media rumor, he will chop staff. Since Twitter is a financial disaster, the move, on the surface, makes sense. Over time, performance will show if Dorsey cut essential people.
Twitter has yet to find a way to bring in revenue, despite its 316 million average month active users. The company lost $136 million in the most recently reported quarter on $502 million in revenue. The company’s outlook made investors more desperate:
Twitter’s outlook for the third quarter of 2015 is as follows:
• Revenue is projected to be in the range of $545 million to $560 million.
• Adjusted EBITDA is projected to be in the range of $110 million to $115 million.
• Stock-based compensation expense is projected to be in the range of $190 million to $200 million, excluding the impact of equity awards that may be granted in connection with potential future acquisitions.
Twitter’s outlook for the full year of 2015 is as follows:
• Revenue is projected to be in the range of $2.20 billion to $2.27 billion.
• Adjusted EBITDA is projected to be in the range of $520 million to $540 million.
• Capital expenditures are projected to be in the range of $450 million to $550 million.
• Stock-based compensation expense is projected to be in the range of $750 million to $790 million, excluding the impact of equity awards that may be granted in connection with potential future acquisitions.
No amount of sales pitching can convince investors that Twitter is more than a sinking ship, with the only hope being that a larger company will buy it. Unfortunately, the largest companies cannot figure out how to improve the prospects any better that Twitter management has.
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