No Turnaround in Sight for TWTR Stock
Over the last two years, it’s safe to say that Facebook, Inc. (NASDAQ:FB) has dominated the social media space. Twitter, Inc. (NASDAQ:TWTR), by comparison, has seriously lagged behind and I don’t see a change coming for TWTR stock anytime soon.
Instead, Twitter stock faces an uphill battle to regain the goodwill of markets. The social media company has had a horrendous narrative surrounding it ever since the stock had its initial public offering (IPO).
By contrast, Facebook continues to lead a charmed life. The story of Facebook is a fairytale for the market, a fantasy come true. A college kid makes a social media platform that grows into a $300-billion company? And yet Facebook stock continued to grow, racking up more than 127% over the last two years. As I said, it seems too good to be true. That kind of growth is staggering.
Many people were wary of Facebook and Twitter stock, mainly because the two reminded investors of the Internet hype that preceded the dotcom crash. However, both Twitter and Facebook represent the “Internet 2.0” phase.
The Internet 2.0 phase began as the technology sector reformed after the crash in 2000. Companies like Facebook and Twitter were born with an awareness that a viable business model was needed to survive. So why is FB stock doing so much better than TWTR stock?
Chart courtesy of www.StockCharts.com
Let’s start with the big picture reasons why Facebook is going to crush Twitter.
For the most part, this is a question of leadership. Before going public, Twitter shuffled around its upper management. Jack Dorsey, co-founder of Twitter, left his post as CEO to make room for Dick Costolo. However, Dorsey’s replacement was unable to drive Twitter forward with a cohesive strategy. Subscriber growth grew weaker and revenues began to slip.
By contrast, Facebook earnings are consistently growing and Mark Zuckerberg is adding new revenue streams. He remains the head honcho at Facebook because he has a vision for the company. Zuckerberg doesn’t intend to keep FB stock afloat as a social media firm, but rather as a media conglomerate.
As Facebook branches out, it is taking the fight to Google, now called Alphabet Inc, with its search technology. Moreover, the advent of Facebook “Instant Articles” and “Instant Video” is taking the publishing industry by storm.
While Facebook is charging content producers to gain specialized access to the 1.4 billion people with active Facebook accounts, where is the Twitter equivalent to these aggressive maneuvers?
Adding to its conglomerate strategy, Facebook bought the virtual reality hardware company Oculus VR, developed their “Oculus Rift” VR headset to”make it work, and is releasing the device as a competitor to Sony Corporation’s “PlayStation 4” and Microsoft Corporation’s “Xbox One.”
Twitter’s most recent change? It changed the icon for the “favorite” button from a star to a heart.
Facebook Stock Is the Future
This summer only widened the gap between Facebook and Twitter. While FB stock was soaring in the clouds, Twitter shook up its management team once more; Dick Costolo got the boot and Jack Dorsey was brought back in.
Ordinarily, I’d be pretty happy about this move. Dorsey is a founder and I have a lot of respect for the geniuses who actually build these companies from the ground up, but Dorsey is also running another company that’s going public soon. Managing both jobs would be difficult in the best of times and the situation is far from being “the best” for Twitter. The social media company is going to need 100% of Dorsey’s attention and efforts to reverse its downward spiral.
While that move may still be possible, if we’re talking about which is the better stock right now, Facebook is the clear winner.