Twitter Tumbles in Second Quarter with Stalled User Base

Friday, 28 Jul, 2017

The network now has a promising set of partnerships in its pipeline, but some investors are skeptical that Twitter will ever be much bigger than it is today.

Twitter said it averaged 328 million monthly users during the quarter that ended June 30, which was 5 percent higher than the same period a year ago.

Twitter's CEO Jack Dorsey said the move was to attract users in low-data parts of the world, such as India, where Twitter found the "app was way too slow to access".

Twitter shares have increased 20 percent since the beginning of the year.

At present, Twitter sports a Zacks Rank #1 (Strong Buy). Revenue fell 4.6 percent to $574 million from $602 million. Also, the company seems unable to extract significant revenue from its users as cost-per-engagement is going down at a worrying rate. By limiting functionality or suspending accounts, Twitter found abusive users generated 25 percent fewer abuse reports.

CNN Money reported trolling on users has scared off advertisers and potential buyers.

At the time of writing, Twitter's stock is down nearly 10 percent in pre-market trading, and that tells you all you need to know about Wall Street's reaction to these latest results.

Average MAUs were 328 million for Q2, an increase of 5% year-over- year and compared to 328 million in the previous quarter. Twitter reported adjusted earnings per share of 8 cents, above the FactSet consensus of 5 cents. Our GAAP net loss was $116 million. It's a slight bump in year-over-year losses, as the site posted a loss of $107 million last year.

Shares in Twitter were down almost 9 percent to $17.97 in pre-market trading, as investors reacted to the flat user growth. This quarter, the very Twitter move of its users not growing and its advertising business stalling happened once again and shed more doubt on the company's future. Through the platform, users can tune in to watch broadcasts ranging from live sports to financial news. Even more, with management previously noting that revenue growth would meaningfully lag user growth, slowing user growth suggests it may be a while before the tech company can return to revenue growth. Competitors like Snapchat and Facebook have all launched their own original video content divisions and as the online advertising market gets increasingly crowded, investors and advertisers will likely want to keep an eye on returns.