Pros React To Twitter-Jack 2.0

Rumors about Jack Dorsey being appointed as Twitter Inc TWTR CEO flooded the Internet on Wednesday.

The stock spiked on the back of the rumor, closing up 5.24 percent.

Benzinga spoke with Investment Strategist Sean Udall and Global Equities Research’s Trip Chowdhry for some insight on the issue.

Drive The Stock To $21?

When asked about Dorsey’s –alleged- appointment as permanent CEO of Twitter, Udall noted that, since the news is not official yet, the reaction is not “real” either. However, he believes this is incrementally positive news, in the sense that “anyone outside of Dorsey, Schmidt, or Armstrong would be incredibly negative [and could] Possibly drive the stock to $21.”

Related Link: Report: Jack Dorsey To Be Named Permanent Twitter CEO

In addition, “moral at Twitter has risen since Dorsey came back.” In fact, Udall doesn’t think “this is a huge deal unless there is a combo with another news item such as guidance or board member to be really bullish.”

In this line, Udall would like to see an industry class person like Eric Schmidt. It “would be my dream, huge addition to the Board,” he said.

Udall points out thee main factors:

1. Dorsey being CEO at both Square and Twitter could help each other in terms of long-run implications.
2. Dorsey doesn’t have to do a ton, just watch the ball. Twitter has a good management team despite the “brain drain.” Udall believes Dorsey is cleaning the house with better or more trustworthy people and a new infusion of talent.
3. An improvement in the Board would be huge move, he added, noting that Dorsey wants to shake up the Board.

“If this news comes out and another week goes by and there’s no permanent announcement...then that would be somewhat bearish,” Udall concluded. “Shorts can start raiding the stock again...Chris Sacca could be good board position too.”

Twitter = AOL?

For his part, Trip Chowdhry assured there are several ways to interpret the news.

From a historical perspective, the fact that Dorsey founded the company and then left is a “clear indication that Twitter probably capped.” This shows that, while Dorsey is smart, investors were foolish.

Moreover, “None of financial metrics have played out. Management has been in turmoil. Investors have to ask why he left.”

Investors keep comparing Dorsey and Steve Jobs, but, “nothing tells us he is passionate about Twitter [like Jobs was about Apple]. I think Twitter in the same place as Blackberry. So the question becomes, what is Twitter? What is a right valuation for the company?”

The market can only support so many companies, the analyst continued. “Twitter is a very good platform for political debates and posturing but has been supplanted by social messaging platforms such as Instagram, Weibo. Market is shrinking, not growing.”

“The question is not about fixing the product,” Chowdhry assured.

“Bringing Jack Dorsey is a sugar coating; if stock goes up it could be chance to take profits. Twitter needs a market creation guy, Jack Dorsey has not shown that...he is a product guy,” the analyst said. “Investors need to focus on fundamentals, but could raise stock for December and March quarters. [This] would be no different than what you saw in Yahoo, same story with Twitter.”

In terms of M&A as a long-term catalyst, Chowdhry compared Twitter to AOL, Inc. AOL: “Once a very high valuation, only to be knocked down and bought out by another ‘bubble’ company down the road.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.