- By Naman Shukla
Twitter's (TWTR) downturn started when its share price peaked in 2014. The stock was down approximately 30% throughout the past year, and the company has lost almost 61% of its overall value since its IPO in 2013.
According to statista.com, Facebook (FB) currently holds a leading position in the social media network industry, as it has over 1.8 billion monthly active users (MAUs), whereas Twitter comes in at ninth position with just 317 million monthly active users.
The intrinsic value of TWTR
Twitter's user growth has slowed down substantially, as it managed to add only 15 million new users since the starting of 2015. In particular, it looks like growth in the U.S. has reached its peak point, as the company added just 2 million users in the past two years.
Twitter's net addition of 15 million new users looks more unsatisfactory when compared to Facebook's Instagram user growth. The mobile photo sharing network had reached 600 million MAUs in December 2016, which represents a surge of 200 million users compared to the year-ago period.
On top of feeble user growth, the company's revenue has also been declining. During the initial nine months of the previous year, the company reported a net loss of $290 million on revenue of $1.8 billion. Deprived of user growth, the company is facing a huge problem in growing its revenue generated by ads.
The company's prevailing ad engagement growth is driven by its new autoplay video ads and surges in ad load, but this is partially offset by reductions in costs per engagement. The company has been putting in effort in producing new revenue streams or enhancing existing ones.
Currently, Twitter is focusing on live video, which is powered by Periscope. This streaming platform permit users to watch other user's videos that have been completed or are presently streaming. In 2016, the company also got streaming rights to 10 NFL games. Additionally, the company also signed streaming deals with numerous sports organizations.
Despite these hard efforts, it is highly likely that the company will not be able to engage users, which is necessary for the company to sustain in the highly competitive area.
Since Twitter's stock price peaked in early 2014, it has continued to move downward. Moreover, it seems like that the company will continue to face problems regarding its user and revenue growth in 2017 as well. As a result, investors looking to profit from the social media network segment should avoid Twitter and consider buying other strong players such as Facebook.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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This article first appeared on GuruFocus.
The intrinsic value of TWTR