Published: Sat, July 28, 2018
Money | By Michele Stevens

Twitter Stock Drops More than 18% in Morning Trading

Twitter Stock Drops More than 18% in Morning Trading

Twitter executives answered questions on the earnings call by saying the steps to improve daily user and advertiser experience would be a long-term boost for the company, and that there had been no revenue hit. In May and June, it suspended 70 million fake or suspicious accounts before they became part of the company's official MAU count. Global ad revenue grew 40%, to $308 million - the first time non-U.S. sales represented the majority of total ad revenue.

Twitter's shares fell 20 percent on Friday, after the company announced that it had lost users.

"They're cleaning up a lot of MAUs that are not good or real", said Richard Greenfield, an analyst at BTIG, referring to monthly active users.

But the markets were jittery ahead of Friday's report after rival Facebook spooked investors by warning of slowing sales growth in the second half of the year as it focuses on "putting privacy first".

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Twitter's put its EBITDA guidance for the third quarter between $US215 million and $US235 million.

The company did not reveal the number of daily users. And, following Facebook's report of a drop of users in Europe, concerns are mounting about whether Twitter could feel the pinch as well. The company is increasing planned capital expenditure and will continue to spend more on getting rid of bad users.

Yet the market had more than doubled Twitter's value over the past year to $32 billion, and the valuation to 50 times estimated earnings.

"Our second quarter results reflect the work we're doing to ensure more people get value from Twitter every day", Twitter chief Jack Dorsey said in prepared remarks. "For the millions that were cleared out, they only lost 1 million users while growing revenue 24%, year-over-year". The company has more than doubled its rate of suspensions since previous year.

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In the meantime, Twitter's business, heavily dependent on advertising, is hanging in there. Financial analysts had estimated the revenue to come in at $698 million.

Wall Street was looking for Q2 earnings of 17 cents a share with $696.2 million in revenue.

The drop in Twitter's share price comes a day after Facebook's shares fell 19% when it revealed it had lost 3 million users in Europe since the Cambridge Analytica data breach scandal and the introduction of strict European Union privacy laws. "We simply don't see the product improvements having a dramatic impact on Twitter's ability to attract new users". Bloomberg LP produces TicToc, a global breaking news service for Twitter's site.

"Based on our current level of visibility, we expect the decline to be mid-single-digit millions of [monthly active users]", the company said in its investor letter.

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The company increased its capital expenditures forecast for the year to between $450 million and $500 million, from $375 million to $450 million, as it expands and upgrades the computer infrastructure underlying its service.

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