NEW YORK (TheStreet) – Twitter (TWTR) and Amazon (AMZN) have been two of 2014's biggest technology disappointments as Twitter's stock has dropped 44% this year and Amazon's 22%, while the broader markets have hit record highs.
The chart below shows that neither Twitter nor Amazon participated in this year's rally:
Both companies, though, should be able to make money for investors in 2015 if they change how they are perceived on Wall Street.
Last year at this time, Twitter's stock was trading at about $70; now it's at about $35. So what's hurting Twitter aside from internal rifts within the company, spurring speculation that CEO Dick Costolo may step down?
Unlike Facebook (FB) , which aims to bring families and friends together, or LinkedIn (LNKD) , which connects business professionals, Twitter lacks a specialty and is hurt by comparisons to the social-media heavyweights.
Costolo has said Twitter should be considered as having three types of users -- calling them "geometrically eccentric circles." The first kind of user are those who are logged into Twitter. Then there are those who aren't logged in but visit the site. And the third kind of user are those who see and access Twitter content from other sites.
The goal of this "geometrically eccentric circles" is to show that Twitter's user base is larger than the number the company reports with its average monthly active user, or MAU, metric. While that's the number analysts focus on, Twitter wants to bring context to the comparison to Facebook, which has five times as many active logged-in users.
Twitter's MAUs, now at 284 million, are growing, up 23% in the most recent quarter. Out of the number, 80% were mobile users. Now, Twitter must convert its MAUs into higher advertising revenue, bringing it on par with Facebook and Google (GOOGL) . To the extent, Twitter can boost ad revenue, the stock will rebound in 2015.
Perception is also hurting Amazon. Critics see Amazon as caring too little about making money. But that needs to be kept in context. Amazon has not changed. Jeff Bezos' goal has been to create an "everything company" competing in areas as diverse as home entertainment with its FireTV to general retailing.
The company can help change its perception on Wall Street by offerig more conservative forecasts and focusing more on profit margins. Remember its revenue is increasing at a 20% rate. If it can balance its aggressive growth strategy with more attention to margins, the stock should rise.
TheStreet Ratings team rates TWITTER INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate TWITTER INC (TWTR) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been generally deteriorating net income."
You can view the full analysis from the report here: TWTR Ratings Report
TheStreet Ratings team rates AMAZON.COM INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMAZON.COM INC (AMZN) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself, poor profit margins and feeble growth in its earnings per share."
You can view the full analysis from the report here: AMZN Ratings Report