Even Trump Can't Save Twitter From Monetization Failure

Twitter Inc TWTR investors enjoyed a big post-earnings pop last week, and shares are surging another 6.5 percent on Monday after the company disclosed that CEO Jack Dorsey purchased more than half a million shares of the stock. However, a surprise uptick in user numbers in the first quarter is still not enough for Argus analyst Jim Kelleher to recommend Twitter to clients.

Trump–Twitter, In Tandem

According to Kelleher, Twitters uptick in users could simply be tied to President Donald Trump and his affection for the platform.

“We believe that the inauguration of President Trump may have prompted some of his base of committed supporters to join Twitter. But this is unlikely to be a recurring event, unless the President’s approval rating improves,” Kelleher explained.

Despite a 3-million increase in monthly active users, Kelleher pointed out Q1 marked Twitter’s first-ever, double-digit declines in sales and adjusted EPS. Looking ahead, Twitter’s monetization process is only going to get increasingly difficult in the face of competition from Facebook Inc FB and Snap Inc SNAP, both of which are growing at much higher rates than Twitter.

Even with Twitter shares down 53.7 percent in the past two years, Kelleher says investors should be careful about buying the dip given the company’s potential for “sharp declines” in advertising revenue.

On Friday, Dorsey Tweeted that he purchased another $9.5 million in Twitter stock and has now bought exactly 1 million shares so far in 2017. Dorsey has been selling vested shares of his other company, Square Inc SQ, throughout the year.

Argus maintains a Hold rating on Twitter.

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Sell In May And Go Away? _____ Image Credit: Screengrab from @realdonaldtrump