Date: 08 Feb 2019

Twitter’s share price fell by nearly ten percent on Thursday, after the social media platform offered weaker than expected forward guidance for 2019. Investors shrugged-off better than expected revenue and earnings numbers from Twitter Inc last quarter and focused on the companies weakened outlook for the rest of this fiscal quarter.

Twitter Inc reported fourth-quarter revenue of $909 million, outpacing estimates of $868 million and posted earnings per share of $0.31 during the last quarter, beating analyst expectations of $0.25 per share. Monthly users data also came in line with forecasts, with $321 million people currently active on the social network, although it was still down from the previous fiscal quarter, which showed $330 monthly active users.

The bearish news for investors came when Twitter said it expected a drop in monthly active users while operating income and revenue forecasts for the first-quarter of 2019 fell significantly short of analysts estimates. Twitter also said it expects its expenses to increase by around twenty percent during 2019 to drive new efforts underway on health and conversation and also new products and sales.

Twitter released a statement yesterday saying that it is changing the way the company calculates its user base, with monthly active users data being ditched for monetizable daily active users data. The company said the move was taken to reflect its audience, although Wall Street appeared more skeptical on the announcement, as actual monthly Twitter usage is trending lower.

The removal of fake twitter accounts and robots from Twitter has reportedly hurt user numbers, with the social media company also blaming GDPR, blocked and banned accounts and product changes for reducing monthly users. Hard-line political posts have also become increasingly frowned upon, with most social media companies actively cracking down on the so-called spread of misinformation.

Inside yesterday’s earnings report, Twitter also said that the new user disclosures would not impact its relationship with advertisers or the information they have before deciding to advertise on the social network. Investors looked past that statement, with Twitter Inc ending yesterday’s session on the NYSE heavily in the red near the $30.00 support level.

 

Twitter Inc Daily Candlestick Chart  | Source: ActivTrader Platform

Twitter Inc Daily Candlestick Chart | Source: ActivTrader Platform

 

Given the bearish news that trade talks between the Trump administration and Beijing are showing few signs of progress, Wall Street is expected to open up under heavy selling pressure today. Momentum is currently to the downside for Twitter’s share price, with the $26.00 level now key technical support on a break below the key $30.00 level.

Any moves higher towards Twitter’s 100-day moving average are likely to open-up further down-side for the stock, given the current bearish pressure social media companies are under and the declining financials and user base of Twitter.

 

Written by Nathan Batchelor, External Analyst

 

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