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Twitter Stock Plummets 15 Percent After it Purged Fake Accounts

28 July, 2018, 20:18 | Author: Melinda Barton
  • Twitter share price tumbles after it loses 1m users in three months

Twitter, like other social media platforms, says it's putting its platform over user growth.

"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. "We believe Twitter's value as a daily utility is enhanced when the conversation on the platform is healthy and people feel safe expressing themselves freely and openly".

This week big tech stocks have been in the spotlight after Amazon was boosted thanks to record results in the second quarter, but Facebook warned of less rosy future growth, which led to a almost 20% fall in its share price. It cracked down on fake accounts, purging suspicious accounts from users' follower metrics and removed 143,000 apps last quarter for violating its policies.

Twitter turned its first-ever profit in the fourth quarter of 2017 and has been profitable ever since, but warned last quarter revenue growth would slow this year and costs would rise.

On Wednesday, Facebook said the average number of monthly active users during the second quarter came in at 2.23 billion, or about 20 million fewer than projected. But Chief Financial Office Ned Segal told analysts that the event, which carried into the third quarter, raked in less revenue in its second two weeks. The company said that daily active users increased 10 percent compared to past year, but - inexcusably - does not disclose the actual figures.

It posted its third consecutive quarter of profits.

Nonetheless, the newly announced decline in monthly users clearly anxious investors.

Twitter share price tumbles after it loses 1m users in three months
Twitter stocks dive 20% as users drop by a million

The user outlook came as Twitter reported higher-than-expected revenue thanks to the FIFA World Cup, video ads and booming worldwide ad revenue.

Twitter said daily active users rose 11 percent from a year ago, without giving a specific figure.

In May, Twitter said it was challenging the authenticity of 10 million potential spam accounts a week.

RBC Capital Markets analyst Mark Mahaney said in an upbeat note this week that Twitter is "one of the largest and most influential social networks" and provides "meaningful value to users". The company is increasing planned capital expenditure and will continue to spend more on getting rid of bad users.

In the meantime, Twitter's business, heavily dependent on advertising, is hanging in there. Net income was $100 million, or 13 cents a share, compared with a loss of $117 million, or 16 cents. Non-GAAP earnings of 17 cents per share were in-line with estimates.

Revenue of $710.5 million, up 24 percent and edging out expectations of $696 million.

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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