Twitter Is Going Through A Brain Drain

Youssef Squali of Cantor Fitzgerald thinks Twitter Inc TWTR is going through a "brain drain" after its management team saw the departure of its CTO Adam Messinger and VP of Product Josh McFarland.

Squali noted the departures follow the resignation of Twitter's COO Adam Bain in November and the elimination of 9 percent of the total workforce in October.

Squali did state that some of these executive shuffles seem to be involuntary. However, it's happening at a time when the October and November user and engagement data remain inconclusive, according to comScore data despite Twitter's new strategy of focusing on live events and President-elect Donald Trump's very public use of his Twitter profile.

"These changes obscure the timing and the magnitude of the turnaround required to support a higher valuation for the stock, in our view," Squali stated. "Barring a take-out or the prospect for one, we expect the stock to remain range-bound short term and maintain a Neutral rating and $20 fair value."

Too Early To Tell If Turnaround Is Real

As previously noted, user and engagement data remain inconclusive which prompted the analyst to suggest it's too early to tell if Twitter's initiatives are indeed paying off.

Squali pointed out that Twitter's total monthly active user base did increase by four million users in the third quarter to 317 million. Moreover, the company demonstrated two consecutive quarters of year-over-year acceleration in daily active usage, Tweet impressions and time spent.

However, the analyst suggested that while these signs are indeed "positive," it's too early to call declare Twitter's recovery to be legitimate and sustainable.