Why Twitter Shares Tanked Today

Is Twitter's plunge meaningful? Or just another movement?

May 6, 2014 at 2:09PM

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What: Shares of Twitter (NYSE:TWTR) plunged more than 13% Tuesday and touched a new all-time low after its post-IPO lockup period expired.

So what: In short, roughly 81% of Twitter's common shares outstanding became eligible for sale today, and insiders are now allowed to sell their previously restricted shares. Keep in mind, however, that several notable executives have already confirmed they won't be selling their stakes following the lockup expiration, including co-founders Jack Dorsey and Evan Williams and CEO Dick Costolo.

Now what: Twitter shares are also still reeling after the company turned in better-than-expected top- and bottom-line results last week, but once again left the market wanting with perceived weak monthly active user growth.

Up until now, I've been hard on Twitter and chose to wait on the sidelines since its November IPO last year. Shares don't look particularly cheap at around 27 times last year's sales and 136 times next year's estimated earnings. But I have to admit it is doing an excellent job of monetizing its monthly active user base, ad revenue per 1,000 timeline views rising 96% year over year, and engagement showing its first sequential gain since Q2 of last year. In the end, with shares now trading 55% below their December high, I think Twitter's finally worthy of a deeper look.

One other stock worthy of a second look is The Motley Fool's Top Stock of 2014. You can read more about it here

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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