Twitter Inc Stock Slumps As Brain Drain Continues In C-Suite

Twitter Inc Stock Slumps As Brain Drain Continues In C-Suite
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Twitter stock declined 4.69% to close at $17.08 on Wednesday after it was revealed that two more key executives have left the company. This is certainly nothing new, as the revolving door has been turning steadily for quite some time. This time it’s CTO Adam Messinger and Product VP Josh McFarland who are leaving.

Revolving door continues at Twitter

Messinger tweeted that he’s leaving the micro-blogging firm to take some time off, while McFarland said he’s leaving the company to go to venture capital firm Greylock Ventures. Cantor Fitzgerald analyst Youssef Squali notes in his Dec. 21 report that Messinger was part of the trio that supported CEO Jack Dorsey as he executed the new strategies. CFO Anthony Noto, who will soon replace COO Adam Bain, was the second member of the trio, while Bain was the third. In other words, two-thirds of the trio that supported Dorsey will be gone.

Squali suggests that some of this latest round of executive departures could have been part of the ongoing restructuring at Twitter, but they don’t come at a good time. Investor sentiment remains at a very low level as they remain skeptical that Dorsey’s plan is working. The analyst feels that it’s still too early to tell whether the strategy is actually working, although he said there are some early positive signs.

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He said that so far, the live-streaming strategy and changes to Twitter’s products seem to be bearing fruit based on the “slight improvement” in monthly active user growth and daily usage during the third quarter. He was also “encouraged” because the micro-blogging platform reported the second quarter in a row of year over year acceleration in daily usage.

The Cantor Fitzgerald analyst has a Neutral rating and $20 per share price target on Twitter stock.

Departures are a red flag for Twitter stock

Mizuho Securities analyst Neil Doshi holds a much more ominous view of this latest round of departures. In particular, he noted that McFarland has only been the VP of Product for nine months and that this position in particular has been a revolving door. It seems Twitter just can’t keep product executives.

In a research note dated Dec. 20, Doshi called one departure of a C-level executive a “red flag” but two in the same quarter “very disconcerting.” Unlike Squali, he is very concerned about all these departures and what they mean for Twitter stock. Doshi noted that the micro-blogging company “claims” that it is streamlining its organizational structure so that it can innovate more quickly and release more products. However, he feels that the continual string of executive departures creates “significant investment risks” for Twitter stock.

He also believes that they could affect morale at Twitter and possibly put the ad business at risk because marketers might view the micro-blogging platform as being a less stable partner. The Mizuho analyst has an Underperform rating and $15 per share price target on Twitter stock. He agrees with Squali that engagement seems to be receiving a boost from the new products, but he wants to see more growth than what the platform reported in the third quarter.

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