Twitter Inc. shares fell more than 10% in extended trading on Tuesday after the social media company forecast third-quarter revenue that fell well short of analysts’ estimates, a sign it’s struggling to win more advertising dollars as user growth stagnates.
The company said third-quarter revenue will be $590 million to $610 million. Analysts were looking for $681.4 million. Monthly active users were 313 million in the second quarter, up from 310 million during the prior quarter. That beat the average analyst estimate for 312 million, according to data compiled by Bloomberg. Second-quarter sales grew 20% to $602 million, compared with the $607 million estimated by analysts. Profit, excluding some items, was 13 cents per share. Analysts forecast 9 cents on average. Premium ad pricing, compared with some rivals, has “proven to be a headwind” for efforts to increase Twitter’s share of social media marketing budgets, the company said in a letter to shareholders. Twitter shares fell as low as $16.41 in after-hours trading Tuesday, down 11%.
The big picture
Twitter is working to make its service more appealing to a wider group of people after several quarters of stagnant user growth. Without a larger audience, the company may struggle to significantly increase advertiser spending. To combat that, Twitter is trying to create another purpose for its site: streaming live events. That way, the company can draw from advertisers’ video budgets—often larger checks they normally write to sites like YouTube and Hulu—instead of competing so directly with Facebook Inc.
The company has done several streaming deals. This week it said it would stream games for Major League Baseball and the National Hockey League. Earlier this year, Twitter paid $10 million for the rights to stream National Football League games on Thursday nights. Facebook and Snapchat have also made live events a priority.
Meanwhile, Twitter chief executive officer (CEO) and co-founder Jack Dorsey has other challenges, like executive defections and analyst speculation his company may be acquired. He’s also faced the departures of several high-profile Twitter users this year after they were harassed. In the most recent incident, Twitter had to block Milo Yiannopoulous, who went by @nero on the service, after targeted abuse against actress Leslie Jones. Finding a better fix for the problem has been one of Dorsey’s top priorities in 2016.
Twitter fell 1.1% to $18.45 at the close in New York on Tuesday. The stock had lost 20% of its value so far this year, compared with a 6% increase in the Russell 1000 Technology Index. The stock had rallied more than 20% in the past two months, before Tuesday’s results. The second-quarter net loss narrowed to 15 cents a share, from 21 cents a year ago. Bloomberg