Published: Sat, July 28, 2018
Money | By Wilma Wheeler

Twitter Shares Fall, Ending A Hard Week For Social Media Stocks

Twitter Shares Fall, Ending A Hard Week For Social Media Stocks

"Twitter's value as a daily service is enhanced when the conversation on the platform is healthier and people feel safe freely expressing themselves", said Twitter CEO Jack Dorsey, while speaking on a conference call Friday.

Twitter said in a blog post in early July that weeding out accounts would not hurt metrics because the accounts would mostly be inactive.

The company warned its monthly user number could continue to fall in the "mid-single-digit millions" in the third quarter.

Tech firms have been under pressure in several countries to be stricter over abusive content and misinformation or "fake news" as well as political influence and protection of personal data.

That leaves investors seemingly unable to value what the biggest companies in the sector - which rely on their potential user reach - are worth.

Twitter reported second-quarter net income of $100.1 million, after reporting a loss in the same period a year earlier.

Twitter said it benefited from two weeks of the FIFA World Cup in the second quarter, with ads tied to the soccer tournament generating $30 million in revenue. The number of users could also decline in the third quarter, Twitter warned.

Macquarie Research analysts last week downgraded Twitter shares to "neutral" despite raising their price target for the stock to $42 from $36.

Facebook's tumble was the worst-ever single-day drop in value for a USA company, and led a sell-off in technology companies that offset solid gains in other areas of the market, including industrial and energy stocks and consumer goods companies.

"Twitter outright said that investors should expect users to decline", says Michael Pachter, an analyst with Wedbush.

As part of these efforts, Twitter said that as of May, its systems identified and challenged more than 9 million accounts per week that were potentially spam or automated, up from 6.4 million in December 2017. The company is expected to post an adjusted loss of $0.18 a share on revenue of $251.6 million, according to analysts surveyed by Bloomberg. "This is an identical overreaction that we saw in Q2 previous year".

Following its second-quarter report Friday, Twitter's shares fell more than 12 percent in pre-market trading to $37.88 apiece. "Last year's Q2 created an incredible buying opportunity in the stock".

Twitter also saw usage fall after saying it would not subsidize users who accessed its application through text messages without paying messaging fees to wireless carriers.

The new capital expenditures forecast is for between $450 million and $500 million, up from $375 million to $450 million, as Twitter expands and upgrades the computer infrastructure underlying its service.

Sales, at $711m, were up 24% compared with past year and above analysts estimates.

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