Twitter Is No Fun, Can’t Offer Proper Guidance

I've been a long-time bear on Twitter (TWTR) and the company's lousy quarter just reinforced the fact that it has 2 major problems:

1) User Experience

As I've said before, unless you have a lot of followers, Twitter isn't much fun.

You  don't get much engagement relative to platforms like Facebook (FB) and Instagram.

Meanwhile, go out and find any teenager and ask them what platforms they're focused on.

They'll say Snapchat and Instagram, which offer more engagement, are easier to use, and are just plain more fun than Twitter.

Not everyone can come up with clever one-liners, but everyone can take a selfie or shoot a quick video.

This has to change.

Twitter has to become FUN to use.

2) Guidance

I'm baffled by Twitter's inability to set its guidance bar low enough to generate real beats.

For Q2 (reported yesterday), Twitter guided for $600 million in revenues. At the time (4/26), that was 12% below street estimates.

And Twitter only beat it by $2 million in revenue!

In Q1, Twitter actually failed to hit its own guidance, even though its guidance was 5% below street expectations when issued.

Any smart company offers guidance low enough to beat.

So if Twitter can barely beat its guidance, it says 1 of 2 things: either they continually overestimate their own revenue momentum, or they need to take investor relations 101.

Given that their CFO is a former high-profile Wall Street analyst, I think it's the former.

Now if Twitter can't beat its guidance for Q3 — which implies just 7% revenue growth — we're looking at a single-digit stock unless it gets taken over.

Perspective

We have to remember that at one point, Facebook (FB) — the undisputed king of social and perhaps the greatest digital ad platform the world has ever seen — was at one point down and out.

So a turnaround can't be completely counted out, assuming Twitter can drastically improve its user experience. (I don't have faith myself)

That's the first step to getting the numbers to turn, though throughout history, I can't remember a single successful turnaround of a social media platform.

Friendster… nope. MySpace… nope. AOL… nope. Google+… nope.

For now, this chart below tells you everything you need to know about Twitter:

It plots the 2017 consensus revenue forecast (red line) against Twitter's stock price since the IPO. This is a good illustration of the trend of growth expectations for the company.

In early 2015, analysts expected over $5 billion in 2017 revenues.

Now they're forecasting under $3 billion.

That red line needs to start going up.

Soon.