Twitter Inc (NYSE: TWTR) shares plummeted 12 percent Friday morning after the company reported a drop in active users in the second quarter. While Twitter has been making major improvements to its platform, analysts say the stock is pricing in unrealistic growth expectations, and the latest numbers seem to confirm that belief.
Twitter reported second-quarter adjusted earnings per share of 17 cents, in line with consensus analyst estimates. Revenue of $711 million beat Wall Street expectations of $698.2 million. Revenue was up 24 percent from a year ago.
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Despite the revenue beat, investors zeroed in on Twitter’s 335 million monthly active user count, which came up well short of consensus expectations of 338.5 million and was 1 million less than the 336 million the company reported a quarter ago. The lost MAUs came primarily from the U.S., where MAU count fell from 69 million in the first quarter to 68 million in the second quarter.
Investors had been concerned that reports Twitter had been suspending as many as 1 million fake accounts per day in the second quarter could negatively impact reported user numbers. Twitter said it removed a total of about 70 million accounts in the second quarter but said most of those accounts were never included in active user counts because they were less than one month old.
“Our second-quarter results reflect the work we’re doing to ensure more people get value from Twitter every day,” CEO Jack Dorsey says in a statement. “These efforts contributed to healthy year-over-year daily active usage growth of 11 percent and demonstrate why we’re investing in the long-term health of Twitter.”
Looking ahead, Twitter guided for third-quarter earnings before interest, taxes, depreciation and amortization of between $215 million and $235 million. Twitter is now forecasting full-year capital expenditures of between $450 million and $500 million, up from its previous range of between $375 million and $450 million.
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Bank of America analyst Justin Post says TWTR stock is pricing in growth that simply isn’t there.
“While we agree that the clean-up efforts are a long-term positive for the platform, we still have concerns on Twitter’s reach and anticipate pressure on MAU growth as suspension headwinds continue,” Post says.
Bank of America has an “underperform” rating and $27 price target for TWTR stock.
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Twitter Inc (TWTR) Stock Tanks as User Numbers Tumble originally appeared on usnews.com
