TWTR Stock – 5 Reasons Twitter Will NEVER Get it Right

social pariah

Twitter has been in a tailspin, but it's problems are not going away

Twitter ( TWTR) is down about 50% year-to-date in 2014. It's off about 57% from its all-time high in December after its post-IPO pop. And all told, TWTR stock is now hovering around all-time lows.

That's right: Shares of Twitter stock are trading in the low $30s, and if this keeps up, TWTR could trade for at or below its offer price of $26 that marked its highly successful initial public offering in late 2013.

There are plenty of reasons to be negative about Twitter, but that hasn't stopped some bargain hunters from nibbling at the stock after it has been beaten down.

I think that's a very bad idea, and in fact, I see five big reasons TWTR might never get it right - in 2014, or perhaps ever:

Twitter Users Already Are Flatlining: In its recent earnings report, TWTR reported monthly active users totaled 255 million at the end of the quarter. Not only did that fall short of forecasts for 257 million, but it also shows a deceleration in Twitter's growth rate. Sure, the growth was 25% year-over-year, but remember that in its Q4 numbers, Twitter reported 30% user growth. Even worse, consider that across 2011, Twitter was doubling its user base every single quarter. It's starting to look like TWTR is rapidly approaching a ceiling on its user base - and for that to happen so soon after the IPO is very disturbing for investors who bought in based on continued brisk growth.

Twitter Is Struggling to Turn a Profit: Twitter still isn't making money based on recent earnings. That's not all that uncommon amid early-stage tech stocks. What's more disturbing is that TWTR revenues and user growth are flattening out already. That means if Twitter doesn't build a better mousetrap in a hurry to turn its users into a profit stream, the company will be feeling big pressure as its revenue growth dwindles and earnings fail to materialize.

Stock Awards Are Costly: Of course, management is getting compensated very nicely despite trouble for TWTR stock. In its official earnings release from April 29, Twitter said that of the $132 million shortfall for the first quarter under generally accepted accounting practices, 'Twitter's GAAP net loss included $126 million of stock-based compensation expense.' Furthermore: 'Stock-based compensation expense is projected to be in the range of $640 million to $690 million' for the full year. That's on total projected revenue of about $1.3 billion for the full year!

Twitter Not Run Tightly: In a recent Wall Street Journal profile, Twitter's chief operating officer Ali Rowghani was pretty much described as the only adult at 'a company filled with young engineers hungry to build a product.' There simply isn't a culture there that looks at profits or Wall Street perceptions - which is fine when you're a VC-funded startup, but murder if you're a multibillion-dollar publicly traded stock like TWTR. The WSJ piece talks about how Rowghani had to dissuade CEO Richard Costolo from purchasing third-party app TweetDeck even when he was 'uncertain about how TweetDeck would fit into the company' and worse, 'changed his mind several times' on the topic. Yeesh!

Jeff Reeves is the editor of InvestorPlace.com and the author ofThe Frugal Investor's Guide to Finding Great Stocks.Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

No Margin for Error: It's easy to pick on TWTR stock, but the sad reality for investors is that this company is not alone in its fight against shifting sentiment. LinkedIn ( LNKD)has cratered 30% this year, and Facebook ( FB) off more than 15% from its March peak. Beyond social and other high-flying Internet stocks from Yahoo ( YHOO) to Amazon ( AMZN) to Yelp ( YELP) have all felt the pain. Broadly, there's little margin of error for high-growth Internet and tech stocks ... and when you post other metrics like the ones above, Wall Street is sure to be unforgiving.