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Twitter’s New CEO Is Right for the Job but It Could Take a While to Feel the Effect
Stock Analysis & Ideas

Twitter’s New CEO Is Right for the Job but It Could Take a While to Feel the Effect

Jack Dorsey’s feat of running two mega-billion companies at the same time came to an end on Monday, when the Twitter (TWTR) and Square CEO announced he will leave his Twitter post.

Dorsey co-founded the microblogging platform in 2006 and has had two stints at the helm – from its foundation until exiting in 2008 and then returning post-IPO, in 2015. Dorsey said he is leaving as the company is now “ready to move on from its founders.”

Dorsey’s exit hogged Monday’s headlines, but Truist analyst Youssef Squali is “not too surprised” by the announcement.

“While Jack Dorsey has founded an iconic and unique company that’s been near impossible to replicate from a product standpoint,” the 5-star analyst said, “User growth, engagement and the commercialization of the platform have proven much more difficult to nail.”

This is evident by the shares’ underperforming vs. its peers’ success. For example, FB stock is up by ~8x since its IPO, SNAP stock has roughly doubled, while TWTR has more or less stayed at the same point. “This is largely due to a mixed performance in results over the last several years,” Squali notes.

The board has unanimously appointed CTO Parag Agrawal as new CEO, effective immediately. Squali believes the appointment “tells you everything you want to know,” and indicates the company will focus on what Squali believes has been the company’s Achilles’ heal – its products and technology.

While the last year has seen some improvement on this front (MAP, new adServer, Topics, Blue), there’s still much to be done to “grow engagement and drive better monetization.”

“So in that sense, appointing a CTO who’s been with the company for 7 years, who’s intimately familiar with the product road map, and who’s going to ensure continuity makes sense to us,” the 5-star analyst opined.

However, Squali notes the size of the challenge ahead is formidable, both from a product and monetization perspective and says investors will need to stay patient until any changes “affect the revenue trajectory.”

Nevertheless, the analyst remains bullish on TWTR and maintained a Buy rating along with an $80 price target, suggesting strong upside of 87% from current levels. (To watch Squali’s track record, click here)

The rest of the Street’s take offers a conundrum; on the one hand, based on 14 Holds, 4 Buys and 2 Sells, the analyst consensus rates the stock a Hold. However, the average price target offers plenty of upside; at $70.83, the figure implies shares will add 55% of muscle over the one-year timeframe. (See TWTR stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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