Shares of Twitter (NYSE:TWTR) are falling following the resignation of its Senior Vice President of Engineering, Christopher Fry, who's leaving for an advisory role with the company. According to Motley Fool analyst Jamal Carnette, this could be a good thing for Twitter investors.
In relation to its social-media peers Facebook and LinkedIn, Twitter spends an inordinate amount of revenue on research and development. Twitter spends roughly 60% of revenue on R&D; Facebook and LinkedIn spend between 15% and 25%.
And while R&D spending is a good thing, there must be a return on investment. Twitter's first-quarter results reported R&D expenses increasing nearly 200% year over year, while revenue only rose 120%.
A large portion of R&D expenses go toward salaries, stock-based compensation, and expenses of engineers. If the resignation points toward Twitter becoming a more efficient company, this could be a good thing for investors.
So is today the day for investors to dive into Twitter? Jamal notes he's been bearish on the investment in the past due to valuation concerns, not the business model. However, The Motley Fool thinks it's a buy.
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Mark Reeth has no position in any stocks mentioned. The Motley Fool recommends Facebook, LinkedIn, and Twitter. The Motley Fool owns shares of Facebook and LinkedIn. 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.