Twitter (NYSE:TWTR) had an incredibly strong day in the market Friday -- a much-needed gain in the value of the stock. With these gains, it may be tempting to start investing in the stock. However, I urge you not to play into the hype. Today, we’ll talk about why the stock has had such a rough time in the market, what we’re seeing lately and why TWTR is worth staying away from.
Why We’ve Been Seeing Declines
While we’ve seen declines in Twitter recently, the downward movement actually started shortly after the company went public. At the end of the day, the company has spent its entire existence struggling to get to profit and bring users in to the system.
Recently, things have gone from bad to worse. After more than a year of user-growth issues, investors pushed for the resignation of the CEO. Soon, co-founder Jack Dorsey picked up the baton, only to let investors down yet again. Unfortunately, even Dorsey couldn’t bring new users to TWTR at a compelling rate.
With the user-growth issue continuing, TWTR took a move in another direction. The company essentially put itself up for auction. At the time, investors got excited and the stock soared. However, as the story developed, the stock fell more.
Companies like Google (NASDAQ:GOOGL), Apple (NASDAQ:AAPL) and Salesforce.com (NYSE:CRM) all backed out of the auction one by one. Soon, it became clear that Twitter simply didn't have a buyer with adequate funding to take over the company. Unfortunately, nobody seems to want to acquire the company.
What We’re Seeing From The Stock Today
While the news surrounding TWTR has largely been negative, we saw gains in the value of the stock on Friday. As of mid day Friday, it seemed like investors thought that the stock had found support as they sent the value upward.
Why You Should Not Jump At This Stock
At the moment, considering the gains on the stock, I heard from investors asking if Twitter is a strong investment choice. In my opinion, it’s important to stay as far away from it as possible. At the end of the day, without strong user growth, the company will have no choice but to plateau -- and meaningful profits are far from reach.
If the company were to be acquired, it would be a great thing for TWTR shareholders. However, I’m not expecting for that to happen. The reality is that if an acquisition was indeed on the horizon, when the auction started to evolve, we wouldn’t have seen the major players dropping out.
Bottom Line? TWTR is in trouble. The company can’t seem to get users excited, can’t bring in bidders for an acquisition and doesn’t seem to have a solution. As a result, I expect further declines.
Where do you think TWTR is headed?