There’s a lot of buyout talk over Twitter (NASDAQ: TWTR), but you shouldn’t be buying into that. Twitter has issues – not the least of which is that it’s led by a CEO who’s attempting to run two public companies.save twitter

The big question right now is: Will Twitter become the next MySpace?

Shares of Twitter have been cut in half in just the last six months and are trading at all-time lows. Part of that relates to the issues at the social media company – namely the revamp of the Moments tap, possibly shifting from a 140-character to a 10,000-character limit for tweets, and possibly rolling out an algorithmic timeline. These are all things that users have pushed back against.

And Twitter’s acquisition of streaming video app Periscope hasn’t been what Instagram is to Facebook (NASDAQ: FB). Periscope has yet to help drive Twitter user growth, nor has it led to a clear monetization path.

Facebook’s success, with shares up 35% over the last year, comes from a commitment to users and the willingness to make big changes regardless of the short-term blowback from users. It’s also done a very solid job of embracing the mobile platform, which has helped the company master the mobile advertising market.

Twitter still has hundreds of millions of users. It’s just having a really tough time figuring things out.  

Getting on the Right Track

Twitter recently shook up its top ranks following the loss of its vice president of media, VP of product, VP of engineering and head of Vine in a week. A major shakeup like this is generally negative for a company, but for a company like Twitter, which needs a fresh perspective, it’s a positive.

Twitter is still growing ad revenue per user at a higher rate than LinkedIn (NASDAQ: LNKD), but investors want more growth from Twitter. However, Twitter needs to streamline its service and figure out monetization of its user base. It has built a platform that allows any person or advertiser the ability to reach a very large audience.

Part of the issue is that Twitter is focusing on getting new users, instead of focusing on its current user base.

How to Think About Twitter

Investors shouldn’t overlook the benefits to Twitter’s network effects, with 320 million monthly active users. Its platform is naturally social and real-time, which is a unique proposition for advertisers. Twitter has a new deal with the National Football League to distribute content to Twitter users, which helps further demonstrate the value of the platform to potential partners.

Twitter is already immensely complementary to other media and content. More deals like the NFL contract would mean more users, market share and time spent on the platform. The big hurdle is offering more success to advertisers with its ad campaigns.

It’s not too late for Twitter, but time is of the essence. There’s more money to come to the online space, as conventional advertisers shift spending from TV ads to online ads. More companies will realize the necessity of brand building and having a broad reach, so there’s still a large opportunity on the horizon.

Yet Twitter shares are down near its IPO price. The social media stock is now trading at less than 5.4 times sales – a deep discount to Facebook’s 18 times sales. That’s also a discount to Alphabet‘s (NASDAQ: GOOGL) 6 times sales.

What to Expect

Twitter still has plenty of cash and a solid balance sheet. If things continue to go “wrong,” there is an opportunity for Twitter to make a major acquisition, including the likes of ephemeral messaging app Snapchat, which is the primary outlet for young users.

The Twitter earnings call is coming up on Wednesday. This will be a key moment for Twitter and CEO Jack Dorsey, who is faced with the task of convincing the world and investors that he has the vision to save Twitter. It will be interesting to see what Twitter and Dorsey have to say this week.

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Published by Wyatt Investment Research at