Twitter CEO Jack Dorsey, who also leads the payment company Square, impressed Wall Street last week, However, it does not have anything related to Twitter but rather, his other company.
Twitter below IPO price now
Square, which was priced below its target range at $9 instead of the expected $11 to $13, gained 45% on the first day of trading. The last time this happened was 17 years ago when TheGlobe.com’s IPO during the dot-com bubble set a record for the biggest daily gain on the first day in U.S. history. TheGlobe.com’s IPO was also priced below the target range, says a report from Quartz.
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The question now is whether Dorsey pull off something similar for Twitter, but one analyst feels it may not happen any time soon. On Monday, Twitter’s stock dropped 4% to fall below its IPO price of $26, reflecting the micro-blogging firm’s struggle to grow its user growth and answer the growing list of questions about its future. Adding insult to injury is the fact that the S&P 500 has gained by over 20% since Twitter’s IPO.
Dorsey needs some time to deliver
Jackdaw Research Chief Analyst Jan Dawson believe it will take “quite some time” for Dorsey to “deliver user growth or other positive results” at Twitter. Referring to the third quarter results, Dawson said the “results really didn’t give investors much to cheer either, with anemic user growth and several other signs that things might be moving in the wrong direction.” The analyst added that investors do not have much confidence on the stock.
“While Jack Dorsey may have said many of the right things, so far all investors have to show for it is the same old results,” Dawson said
Twitter’s stock dropped sharply after the third quarter earnings report following dismal user growth and lower guidance for the fourth quarter. The majority of analysts have lost hope on the stock, believing that static user growth will not help the bottom line meaningfully. Twitter, which trades at a forward price to earnings ratio of over 53, is believed by many to be overvalued. This may be true, but for the last quarter, revenue was up 58% year over year to $559 million.
On Monday, Twitter shares closed down 4.07% at $25.20. Year to date, the stock is down 30% while in the last one month, it is down by almost 17%.