Jack Dorsey, the co-founder and CEO of Twitter, resigned from his position on Monday, replaced by Parag Agrawal, the firm’s chief technology officer. In addition, Dorsey will leave the Board of the firm in May 2022 when his term expires.

Regarding the firm’s operations, Twitter (TWTR) did not make any changes to its guidance and long-term goals which the firm had shared with investors during its last earnings call. This announcement does not impact our view of no-moat Twitter and our Standard capital allocation rating of the firm. We are maintaining our $58 fair value estimate.

In our view, the firm will be better positioned to increase user monetisation and expand margins under Agrawal as Dorsey could not focus mainly on Twitter’s future when also leading the narrow-moat Square (SQ). Agrawal has demonstrated his devotion to Twitter as he joined the firm as an engineer in 2011 and was awarded the CTO position four years ago.

Agrawal is credited with helping the firm apply machine learning to enhance the platform, accelerate development of new products, and the return of solid user growth in 2016 and 2017. It remains to be seen whether Agrawal can help Twitter maintain the culture that Dorsey created – one that pushes for innovation, driven by openness on the platform for users and within the firm.

We are also a bit uncertain about how brands and their ad dollars will react to this decision in the long run. However, in a letter to Twitter employees, Dorsey said Agrawal was chosen to replace him “given how deeply he understands the company and its needs” and that “he leads with heart and soul.”

Twitter in detail

  • Twitter has no economic moat and is rated as a 3-star stock.
  • Its fair value is $58 per share.
  • Shares spiked 10% as the initial news came out on November 29, pushing them above $50, but they later closed down nearly 3% at $47. 
  • Twitter floated around eight years ago in November 2013, with an issue price of $26
  • Shares jumped on their first day of trading above $40. Despite some volatility along the way, shares are not that much higher than in 2013. Facebook/Meta shares are up 800% since the float in 2012.