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Twitter's Jack Dorsey "Intends" to Continue Dual CEO Roles

Zacks Equity Research
Updated

Twitter Inc. TWTR founder and current CEO, Jack Dorsey, who is also the chief of Square SQ, apparently has no plans of quitting his dual responsibilities despite the criticism he faces.

The criticism comes as both Twitter and Square are at crucial junctures. Twitter, though a world renowned brand and a popular social media platform, has yet to rake in profits in its decade-long existence. In addition, user and advertising revenue growth remains sluggish. Twitter just has 313 million users whereas Facebook Inc. FB boasts over 1.08 billion users.

On the other hand, Square, a mobile wallet company that Dorsey found in 2009 after being ousted from Twitter, is just in its infancy.

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As both the companies require tremendous attention, Dorsey’s dual role is now being questioned. Especially, even a year after his return to Twitter’s helm, there has been not much improvement in the company’s performance.Dorsey’s strategy of focusing on live and user friendly changes aren’t exactly adding much to the numbers.

Coming to the third quarter 2016 revenues, on a year-over-year basis, revenues just grew 8.2%. This is the company’s lowest gain since it went public. Revenue growth has been decelerating over the last several quarters.

However, Dorsey has no plans to quit. Talking at an event yesterday, Dorsey was quoted by media reports saying "My intention is to serve both companies in every way I know how and make sure that we are really focused on what’s most important for each."

After having made his intentions clear, Dorsey has a Herculean task to pacify agitated investors. Twitter investors have been losing patience and one can hardly blame them. Year to date, shares of Twitter are down 15.82% compared with 3.70% decline in Zacks Internet Software Market industry. Given the mounting troubles, buyout speculations have intensified.

In the last couple of months, we witnessed too many rumors surrounding Twitter’s takeover. Right from Alphabet GOOGL to Salesforce to The Walt Disney Company, all were speculated to have shown interest in buying the micro blogging site. But there was a twist in its ‘takeover’ tale with most bidders pulling out of the race. Reportedly, profitability issues, stagnant user growth and the infamous trolling did not do much justice to the estimated bid price of $16 to $20 billion. 

However, help for Dorsey might come from an extremely unexpected corner. Media reports now observe that Twitter might benefit from Donald Trump being in the White House. Per a Barron’s Next report, “President-elect Donald Trump’s continued practice of tweeting surprising statements nearly every day has arguably made the service more valuable – imagine how valuable a newspaper would be if the president used it to make market-moving pronouncements.”

Further the report has quoted an analyst stating that Twitter’s user growth in the current quarter could increase 4.4 million users which though sluggish is better than expected.

So will Trump’s love for Twitter help it achieve the much elusive turnaround? It remains a wait and see story.

At present, Twitter carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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