Twitter shares just plummeted after earnings miss. And it got a downgrade too
Shares in Twitter have plummeted after another tough quarter, opening more than 15 per cent lower after missing estimates for revenue and cutting forecasts for the next three months.
Shares fell under $15 for the first time since February.
Twitter failed to shake off concerns that it has trouble with growth. The social network did increase its number of users to 310m after the first ever decline earlier this year, however, a 36 per cent rise in revenue to $595m (£409m) fell short of estimates of more than $600m. Forecasts for the second quarter are also forecast to be well below expectations.
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The latest numbers have resulted in analysts at Bank of America Merrill Lynch downgrading Twitter from neutral to underperform while JP Morgan downgraded from buy to neutral.
Read more: Twitter shares plunge as it misses revenue estimates and cuts forecasts
“Twitter’s slide today reflects just how uncertain investors are about the firm’s ability to squeeze any more revenues out of the platform. The figures were far from terrible and actually somewhat better than January, but it’s the slashing of forward guidance that’s got people worried. Investors are losing patience," said ETX Capital's Mark Priest.
"It’s fast becoming something of an intractable problem for the company – while Facebook is able to keep driving ad revenues Twitter looks a little lost. Maybe Jack Dorsey is right in saying Wall Street doesn’t get his company, but he needs to understand that Twitter’s influence counts for nothing if there isn’t a steady growth in revenues."
However, share price volatility is to be expected around Twitter's earnings, said Disruptive Tech Research analyst Louis Basenese. "Twitter’s categorically the worst stock to own around earnings reports. The stock’s sold-off violently the day after each report for five straight quarters (and counting)," he told Morning Wire
Read more: Bad moments ahead for Twitter, says Morgan Stanley
"The only reason to own Twitter is for the takeover potential. However, as more social media platforms launch and/or gain traction, the value of Twitter’s asset (310m active users) keeps decreasing," he added.
"Naturally, the price point at which suitors become interested keeps dropping, too. Instead of my previous prediction of interest at $15 per share, I now think the stock needs to drop close to $10 before any serious bidders materialise."