Twitter Inc (NYSE:TWTR) edged up following its ambitious growth outlook at the Analyst Day. However, as Jay Srivatsa of Chardan Capital Markets discussed on CNBC, the company missed to touch on its profitability. Srivatsa also recognized that taking on Facebook Inc (NASDAQ:FB), Snapchat and WhatsApp, for instance, won’t be a trivial affair for Twitter. As such, the management has a lot of work to make investors happy. Nonetheless, the company’s growth outlook is encouraging should things unfold in the desired manner.
During the Analyst Day, the management of Twitter Inc (NYSE:TWTR) used the opportunity to offer a vision of how they are planning to add more users to the network. Additionally, the company talked about enhanced user engagement so that subscribers can spend more time on the platform than they currently do. An average user on Twitter spends 4 minutes on the site, which trails 40 minutes spent on Facebook Inc (NASDAQ:FB) by an average user.
“Costolo talked about how nearly 500 million users come to Twitter but very few log-in. They go right up, they check something they are gone. So, the challenge for the company is to first attract the users and second is to engage the user. That is by far the biggest challenge ahead of the company […],” stated Srivatsa.
Twitter Inc (NYSE:TWTR) is hungry for growth, and that is something that investors want to see improvement. While Twitter is growing its user-base, the growth has lost steam in the recent times, raising concern among the investors. The company said it was hoping to have 1.5 billion users by 2018 and 2 billion users by 2020. That will enable the company to have annual revenue of $14 billion over the next ten years.
“These are new features, new apps. So, there will be expenses associated with the company. But if you look at some of the stuff they are doing, one is sharing video. I think that is something that really targets the Facebook crowd. Facebook has 1.2 billion users and Twitter has more like 280 million. They want to get there. They want to get to the Facebook kind of number. So, sharing video is one of the aspects. The other one, they highlighted is private-messaging, kind of like what Snapchat and WhatsApp does. By doing some of these things they hope that they can attract more people to log-in and become Twitter users and active ones,” said Srivatsa.
However, regardless of the growth promise, Srivatsa said that Twitter Inc (NYSE:TWTR) failed to answer the big questions. The growth plan means that the company would continue spending more money, raising concerns about whether the company was in a zero-sum game.
“I think the way investors read the comments and stock obviously reacted well was that in doing some of these changes they hope to get more users in, get more people engaged. Hopefully through that they would get more ad revenue which would at some point get them to profitability. I think that big question has not been answered yet and that to me is the big challenge ahead of the company” he noted.
Srivatsa does not have a rating on the stock of Twitter Inc (NYSE:TWTR). However, he said investors should look beyond the promises to actual execution of the same.
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