When it comes to Twitter (TWTR), Wedbush Securities analyst Michael Pachter is of two minds. While he thinks the microblogging service itself is "phenomenal," he's not a fan of its shares or its management team.
"I have always thought that it was overvalued until they start to get things right," said Pachter in an interview before today's earnings release. "They haven't yet proven that."
Pachter, who has a "neutral" rating on Twitter's shares, has lots of company on Wall Street. Fourteen of the 24 analysts who follow Twitter rate it a "hold," eight rate it a "buy" and two consider it a "sell." The company's disappointing fourth-quarter results will only fuel investors' skepticism about the stock, which has plunged more than 35 percent this year.
In the three months ended Dec. 31, 2015, Twitter lost $90.2 million, or 13 cents per share. Revenue surged to 48 percent to $710 million from $479 million a year earlier. Excluding one-time items, profit was 16 cents, topping Wall Street's expectations of 12 cents. The revenue figure was in line with expectations of $710 million.
But particularly concerning to investors was Twitter's monthly active user base figure, which shrank to 305 million from 307 million in the previous quarter. To make matters worse, Twitter's earnings guidance was also lackluster. Not surprisingly, its shares tumbled in after-market trading, falling at one point by 14 percent before trimming much of that loss.
One of Twitter's biggest problems, in the view of Pachter and other critics, is its complexity, especially compared with its much larger rival Facebook (FB).
'The problem with Twitter is that the people who should be using it aren't using it because they don't actually know what to do with it," Pachter said.
Mindful of such criticism, Twitter has recently unveiled some changes, including altering its timeline to put the tweets it thinks users would want to see most at the top, followed by the real-time news feed that has been a feature for years. The company is trying to convince advertisers that its reach is broader than they realize when traffic from people who access the site without tweeting is considered.
"Twitter has always been considered a 'second screen' for what's happening in the world, and we believe we can become the first screen for everything that's happening now," the company said in its shareholder letter that accompanied the latest quarterly report. "And by doing so, we believe we can build the planet's largest daily connected audience."
Twitter CEO Jack Dorsey is another area of concern because he splits his time between Twitter and Square (SQ), the payments processor where he's also CEO.
"He can be a a part-time employee at two companies, or he can be a full-time employee at one," Pachter said, adding that he blames the board for hiring Dorsey in the first place.
Considering Twitter's nearly 70 percent share price fall over the past year, it seems getting back its hot-growth status would take at least a full-time effort.