Twitter CEO change: ‘The company had not really achieved its full vision,’ analyst says

Jefferies Analyst Brent Thill examines Twitter's outlook as its stock continues to climb following confirmation that CEO Jack Dorsey will be stepping down and replaced by CTO Parag Agrawal.

Video Transcript

BRIAN CHEUNG: Yahoo Finance, obviously, the big story of the day is Twitter. A big change at the top as Jack Dorsey, the CEO, says that he'll be stepping down. That would allow chief technology officer, Parag Agrawal, to succeed him as CEO. This is now official.

We actually got a tweet from Jack Dorsey himself about a minute ago, where he said, not sure anyone has heard, but, comma, I resign from Twitter, and included a screenshot of an email that he sent to the company where he said, quote, "I want you all to know that this was my decision and I own it. It was a tough one for me. Of course, I love this service and company."

And apparently, there will be an all hands meeting tomorrow for the company to announce the changes, which we understand are effective immediately. Let's get a little bit more color on this with Brent Till, senior analyst over at Jefferies. And Brent, obviously, this has all been unfolding on seemingly a minute by minute basis this Monday morning, but just wondering what your initial reaction is to the news over there.

BRENT THILL: Hey, good morning. I think everyone's excited for the change. Jack, obviously, has had incredible foundation for the story. But as many have found with this, it was time to move on. The stock had really lagged. The company had not really achieved its full vision. You know, when you talk to advertisers, they effectively have gone through this start, stop, start, stop movement with Twitter and ultimately haven't seen the ROI that other social platforms have seen. So I think it was time to make the change.

And clearly, Wall Street likes this. Investors like this. I think clearly, the company, this would hopefully increase the velocity of the change in their ability to react and do the right thing for their customers. And so I think, you know, anyone that uses Twitter I think can relate with me on this that the product can be noisy. It can be not as effective as other social products in terms of identifying what you want. And they need to go back to, I think, a better sense of a foundation on the product.

And clearly, promoting the CTO to the CEO is actually a great move. I think many thought Ned Siegel was going to get it from a CFO perspective. So we'll see what happens there with Ned. And is he excited or disappointed in this decision? And does he stay at the company, given that perhaps he probably wanted that role? So, you know, there's clearly a step in the right direction. But ultimately, the product still needs to be fixed.

And if you look at the stock, the stock's done nothing. If you go back to the IPO price, and you can see it on the chart that you're showing right now, I mean, it's not been a great run for investors. So we've continued to like Snap and Facebook and other social names over Twitter, given this inability to execute as cleanly on the product side. And then they've hung some pretty big financial targets out there that may be difficult for them to meet at this point. So you have potential for them to reel that back in after they got a little excited and gave some pretty big targets.

JULIE HYMAN: Hey, Brent, it's Julie here. I just wanted to mention, by the way, for our viewers that this stock is still halted right now. We saw it rise quite a bit in pre-market trading on the report that Dorsey was stepping down. And as you can see at last check, it was up a little more than 3%. Let's talk Parag Agrawal a little bit more. I noticed he is not terribly active on Twitter in contrast with Dorsey, who's sort of mastered the tone of his own product. Is that a feature or a bug for Agrawal?

BRENT THILL: I think, you know, ultimately, look, none of the companies that I worked for want us to be super active. So perhaps, they instituted something where Jack was the voice of the execs on that channel. But yeah, I mean, look you ultimately want people using-- eating the dog food, if you will, right? And clearly, I think he's probably pretty deep into the product and understands it well. But I don't think that's the issue. I think the issue right now really is around the quality of the product experience for advertisers.

So we use it for free. Advertisers pay for it, right? And ultimately, if they don't get the efficiency that they need and the targeting capabilities that they need, they're not going to stick with it. And that's what we keep hearing back from the advertiser checks, that it's a hey, we're going to fix it. They fix it, they come back. They give them more money. And then it really doesn't achieve their full vision. So I think this has been a start, stop, start, stop movement for a lot of advertisers. And they want better consistency.

And for users, I think the users, anyone that's used the targeting capability or looked at Facebook and then gone to Twitter, it's not clearly that the targeting is not the same, right? And there's a lot of noise in the system. No question Twitter is an amazing foundation, incredible opportunity to take it from where it's at today. But they just haven't figured it out yet. And it's just proof's in the pudding when you look at the stock, you look at the sentiment on the story, you look at all the things around. There's better stories. And our job is to pick relative outperformers. This has been an underperformer.

So it's, I think, hopefully, this is a step in the right direction. It's going to take time. It's not going to change overnight. And clearly, then, what happens now in terms of with his new appointments and what other changes he needed to make that trickles down-- does Ned stay or go? Clearly, I think many people believed that Ned was going to be the CEO. Is he happy or is he disappointed? What happens there?

So you're going to have a lot of shrapnel that kind of has to settle down after this move and let the dust settle off these changes. And then it's going to take a six to nine-month process to figure out exactly what he does, and does it hold? And I think right now, again, there's just better stories that are out there. This is no question a cheap asset, an asset that has not done anything, an asset that since the IPO has been one of the worst performing names in tech. So it is what it is. And ultimately, hopefully, they can fix it. No question a great brand, but they haven't executed well.

BRIAN SOZZI: Brent, does this news-- should one look at this news and now rotate into Twitter? Or if you have been long Snapchat, if you've been long Meta/Facebook, do you stay with those names?

BRENT THILL: Well, I think, you know, look, as I said, it's a step in the right direction. So you've got to give the company credit and say, look, you know, can they make the right changes? And ultimately, does-- were they holding back changes that Jack didn't want to make? And now they will make that, actually help improve the health of the company.

So I would say, look, there's optimism, obviously, among investors that this is a step in the right direction, but this is a multiple mile journey, right? They're in the first innings of this. So I think, look, it's interesting, it's compelling. I have a hold on the stock. I don't have a buy. So I think we'll evaluate it as it goes. But I think it's a sign of encouragement. It's a positive light for the story in the short term. But I think, again, this is going to take multiple quarters, if not years, to play out.

JULIE HYMAN: Yeah, we'll have to see what actually Agrawal does in the role once he takes it. Brent, thank you so much for this quick reaction to this breaking news. Brent Thill of Jefferies talking to us about the change at the top of Twitter. And speaking of change, the stock is now open again for trading. And the shares are up less than they were before we got the confirmation that Jack Dorsey was stepping down. They're now up by about 3%.