Sunday, December 6, 2020

Twitter (TWTR) Stock Plunges 20%: Will twitter stock go up further?

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Something is worrying Twitter investors despite positive revenue and earnings estimates upbeat on the top and bottom lines.

Twitter, Inc. (TWTR) stock is bleeding today despite the positive third quarter results surpassing the consensus estimate. The shares of the social media giant are down by almost 20.46% at 1:32 P.M. EDT. 


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Twitter reported its third quarter earnings on Thursday that bamboozled analyst estimates on both the top and bottom lines. The earnings per share were forecasted to be around $0.6 per share which the company reported $0.19.

The revenue was expected to be $777 million while Twitter recorded a whopping $936 million. Twitter ad revenue increased by 15% year-over-year to $808 million with total ad engagement growing 27% over the same period. The CFO of Twitter, Ned Segal mentioned that the return of live events and previously postponed product launches helped drive the increased advertising spending. 

Despite the ad sales rose and revenue was stronger than expected, what was the reason for this massive dip of Twitter stock in the market today? The reason was the company fell short of expectations for adding new users. 

The analyst estimated monetizable daily active users (mDAUs) to increase up to 195 million, whereas Twitter recorded 187 million. The total mDAUs increased by only 1 million from the second quarter. However, 187 million during Q3 is still a 29% increase compared to the previous year period. 

What’s Forthcoming?

The company has warned that the upcoming US presidential election will impact the advertiser behavior of Twitter which makes it hard to predict. 

Twitter wrote in the release:

“The period surrounding the US election is somewhat uncertain, but we have no reason to believe that September’s revenue trends can’t continue, or even improve, outside of the election-related window.”

The Chief Financial Officer, Ned Segal highlighted that the upcoming uncertainty can impact the company just like the civil unrest during the second quarter. He added that despite the fact that most of the advertisers move away or pause their spending during such time but end up coming back in large numbers and spending upon their budgets as per their previous targets. 

Segal also highlighted that the company is working on improving subscription service. He pointed out that the revenue will only be affected if they gain it through the advertising channel but the company plans to invest in other channels as well. 

Twitter reported that it has already seen some reaction from its efforts to promote healthier conversations. During Q3, the company worked on the promotion of article retweeting, users reading an article if they retweet it without clicking on the link. Twitter recorded 33% of the users now open the articles which people retweet. 

To attract investors and keep them on its side, Twitter, Inc. (TWTR) will surely focus on this but at the moment it seems like that the U.S. unrest and presidential elections might not bring attractive results during the next quarter. 

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