Twitter Growth Slows, Wall Street Begins to Question Company Capabilities

Twitter Growth Slows, Wall Street Begins to Question Company Capabilities

With the growth of incoming Twitter users slowing recently, Wall Street investors who have put their faith (and money) in the success of Twitter are beginning to question the company’s capabilities. Many are beginning to wonder whether or not or not the once booming microblogging service and social networking site is actually a real contender to one day match the number of users that Facebook Inc. has attracted, as was once thought.

Investors put stock in the company with the hope that it would one day grow and expand to match Facebook’s 1.2 billion users. However, the fact that Twitter’s growth has slowed has caused at least 16 Wall Street analysts to slash their target price on the company’s stock, as they begin to question the company’s capabilities.

In addition, Twitter’s shares have lost about one-third of their initial value since the beginning of the year. The company was one of the top percentage losers on the New York Stock Exchange, opening down 11 percent at $37.80 per share on Wednesday morning.

The social networking and microblogging website has basically divided its investors and the rest of Wall Street into two sets. There are two different mindsets about the company. Some people believe that Twitter still has the potential for greatness and to catch up to matching where Facebook is at in terms of growth and expansion, and they still have hope for the company. Then there are those who believe that Twitter is greatly overvalued at this point, and that its potential is nearly gone at this point. This set of people believe that the company reached has its peak already, and it has been in decline ever since then. Twitter first rose to mainstream popularity around early 2009.

Granted, a reason that could be attributed to the potential of Twitter slowly fading away is the “borrowing” of its ideas by the already extremely successful Facebook. Since Facebook is already way ahead of Twitter’s game to begin with, this puts it at a distinct advantage. The social media giant has always had more users straight from the beginning. It also has more options than Twitter, including games, a larger variety of custom settings, and more ways to customize the users personal profile. Twitter, with its 140-character status updates, trending newsfeeds, and hashtags, can hardly compete. When Facebook started using hashtags about a year ago, and started doing a trending subject newsfeed, it had everything Twitter had, and more. The fact is that Twitter will really need to step up its game if it is going to try to compete with Facebook at all by adding new features and expanding its site immensely.

The company reached its peak this past December, and, last year in 2013, had a $46 billion market capitalization on merely $665 worth of revenue, which made it one of the entire world’s priciest stocks, and many investors were then beginning to argue that without a doubt this company could one day match Facebook. Twitter’s market capitalization was $25.1 billion at the close of Tuesday, and as its growth continues to slow, Wall Street is questioning the company’s capabilities and if it will ever even be able to come close to touching Facebook again.

By Laura Clark

Sources:
Reuters
The New York Times
The Wall Street Journal

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