Thursday, October 25, 2018

Will Twitter's Monthly Active Users Figure Disappoint Again?

  • Stocks
  • US earnings' season

Ever since Twitter announced its second quarter performance figures, its stock price dropped around 32%. To some, this drop might be surprising given that revenue and profit figures beat analyst expectations. However, the drop is not surprising because the monthly active users figure dropped compared to the previous quarter and printed lower than analyst consensus.

The drop is mainly attributed to two main reasons: the company’s decision to not renew its paid SMS carrier relationships in some countries, and the company’s initiatives to focus on complying with the European Union’s General Data Protection Regulation. Note that during the second quarter conference call, the company also provided weak guidance for the third quarter which also took a toll on the stock price.

The key point within the guidance that caught the attention of investors was also related to monthly active users. The company warned that monthly active users will fall again in the third quarter given that they started removing fake accounts, bot accounts, hate speech and other corrupted content.

Analysts are already pricing in a drop in monthly active users from 335 million to 333 million and the focus will be on whether the monthly active users figure will drop more or less than expected. Not as material as the monthly active users figure but important to mention are the revenue and earnings per share figures, Analysts polled by FactSet expect $700 million in revenues and $0.14 in earnings per share during the third quarter.