Will Twitter's Layoffs Help Shareholders?

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  • Twitter Inc TWTR shares have appreciated 17 percent since October 5, after having steadily declined from above $50 in April.
  • Axiom analyst Victor Anthony maintained a Buy rating on the company, with a price target of $37.
  • The company’s move to cut headcount may be aimed at boosting productivity, Anthony stated.

Analyst Victor Anthony mentioned that the news of Twitter considering layoffs across all its departments comes as a surprise after the recent appreciation in the company’s share price.

Twitter shares gained 17 percent after the announcement of Jack Dorsey as the company’s permanent CEO, the launch of the company’s Project Lightning and an expansion of pre-roll ads.

With this decision Twitter joins the list of several other companies announcing layoffs or having reduced headcount this year. Anthony added that although layoffs generally signal revenue pressures, in Twitter’s case the motive could be to “prioritize investments towards more productive projects and increase productivity.”

Twitter has a long-term goal of boosting its adjusted EBIDA margin from around 24 percent in 1H15 to 40 percent. The analyst stated that a “less-bloated cost structure” could help achieve the goal faster.

“Overall, despite the positive news last week and our positive stance on the stock, we believe Twitter remains a work-in-progress and much work is ahead to drive up engagement and user growth,” the Axiom report mentioned.

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Posted In: Analyst ColorReiterationAnalyst RatingsaxiomVictor Anthony
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