Can Twitter Stock Bounce Back From Last Week's 12% Drop?

By Rick Munarriz Markets Fool.com

Image source: Twitter.

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A wild and crazy trading year is angling for a bearish close atTwitter(NYSE: TWTR). Shares of the hashtag hawker moved 11.7% lower last week, weighed down by the resignation of CTO Adam Messinger and a sponsor-facing gaffe. The stock declined for seven straight trading days before a slight recovery on Friday.

Messinger announced that he was leaving the company -- on Twitter, of course -- on Tuesday afternoon. The news helped smoke out some of the optimistic speculators betting on the meandering social media company being acquired anytime soon. Executives would be unlikely to leave a company if they knew that a buyout rich with golden parachutes was on the way.

The technical issue was revealed later in the week. Twitter conceded that an app update for Android devices affected the streaming of some video ad campaigns between Nov. 7 and Dec. 12. The problem has been resolved, and advertising partners were notified. Twitter detailed the impact of the issue with its advertisers but not with its shareholders. It's unlikely to leave a material dent in its fourth-quarter results, but it's a scapegoat waiting to happen if things don't go according to plan.

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The rise and fall of Twitter in 2016

It's been a volatile year for Twitter investors. The stock is trading 29% lower year to date, but it hasn't been a straight line down. The stock has shot higher when buyout rumors start to simmer, something that has happened a lot through 2016.

Twitter stock traded as low as $13.73 in April, only to hit a high of $25.25 in September. The shares have given back most of those gains, and Twitter's now trading in the mid-teens.

The former dot-com darling is in a funk. Monthly active users grew at a mere 3% clip over the past year, and Twitter's revenue growth slipped into the single digits for the first time as a public company during the third quarter. Wall Street pros see the year-over-year top-line growth decelerating again during the current quarter, and that was before the revelation of the Android-based ad display hiccup.

The prolific social media platform will keep Twitter relevant as long as its user base holds up. Stagnancy isn't fatal when we're talking about 317 million monthly active users. The stock has taken a hit in 2016, but it's not out of the realm of possibilities that a suitor finally steps up to take advantage of the distressed share price. Twitter still matters, even if many investors no longer feel that way these days.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.