Twitter (TWTR) Stock Rallying After CEO Costolo Quits, Jim Cramer Weighs In

NEW YORK (TheStreet) -- Shares of Twitter Inc  (TWTR) were rallying, up 3.01% to $36.93 in early market trading Friday, adding to its gains from late Thursday after the company announced its CEO Dick Costolo is stepping down.

Costolo will step down from the position effective July 1, while co-founder Jack Dorsey will act as interim CEO to take his place.

TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio and Director of Research Jack Mohr wrote in a recent post on Action Alerts Plus, "We are pleased with this move, and have been calling for Costolo to step down (quite prominently) for quite a long time now, as we believe the company lacks a clear and consistent vision and strategy." 

"While we do not believe the company can be fixed overnight, the only way it can begin the turnaround process is by making a change at the very top. Dorsey is a proven leader, visionary and creator," Cramer and Mohr added.

Analysts at Jefferies issued a note this morning saying Twitter's next CEO should focus on user growth and product improvements, and not on monetization.

The firm noted that investors are worried about Twitter's inability to increase its logged in user base.

Jefferies analysts maintained a "buy" rating with a $60 price target.

In a Twitter post yesterday, Costolo welcomed Dorsey back.

In response, TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio tweeted:

According to a regulatory filing, Costolo will continue to serve on the company board, Reuters noted.

San Francisco-based Twitter is a global platform for public self-expression and conversation in real time, where any user can create a tweet and any user can follow other users.

The company generates its advertising revenue primarily from the sale of its three promoted products which include promoted tweets, promoted accounts and promoted trends.

Insight from TheStreet's Research Team:

Jim Cramer commented on Twitter in a recent post on RealMoney.com. Here is what Cramer had to say about the stock:

Dick Costolo, outgoing CEO of Twitter  (TWTR), was one quarter of the way from being inducted into the Mad Money Wall of Shame. You know what the criteria are for that hallowed anointment?

You have to be able to create value by departing. That's the definition of what Costolo is doing by departing and departing quickly while staying on the board.

Now, there was a lot of chatter tonight about how incoming CEO Jack Dorsey made it very clear that nothing would change and there would be no major shift in strategy.

What's amazing is that I heard credible people actually believe this nonsense. You are going to see a wholesale shift at this company, but it is not going to be overnight.

The shift will be the following:

  1. The company will start listening to what Twitter followers want and give it to them in a way that is smart and inventive.
  2. The company will call together all the big advertisers and say, "What do you want, we will give it to you."
  3. The company will make partnerships that couldn't be made under the generally acknowledged disorganized regime of Costolo.

Most importantly, I think the company will take every single suggestion from investor Chris Sacca and put them into place. I thought Sacca's blueprint was brilliant and doable. I think Costolo simply couldn't possibly execute it.

- Jim Cramer, 'Tweet This: Big Changes Coming to Twitter' originally published 6/11/2015 on RealMoney.com.

Want more information like this from Jim Cramer BEFORE your stock moves? Learn more about RealMoney.com now.

Separately, 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 some concerns, 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 unimpressive growth in net income over time."

You can view the full analysis from the report here: TWTR Ratings Report

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