Twitter's High-Flying Stock Hits Turbulence After MAUs Drop In Q2

Twitter Inc TWTR shares were tumbling Friday in reaction to second-quarter results reported ahead of the market open.

The stock, which has had a stellar run in 2018, was down 15.88 percent off the open to $36.13.

Twitter's forecast for monthly active user growth suggests a 2-percent drop, Wedbush analyst Michael Pachter tweeted after the print. "They only purged 2 percent (according to my informal 'survey'), so it appears that without the purge, growth had already stalled," he said.

What Happened

MAUs totaled 335 million, with 267 million accounted for by international customers and 68 million by U.S. customers. The year-over-year increase was 9 million, but the figure was down 1 million from Q1.

The sequential decline, according to Twitter, reflected impact from "decisions made to prioritize the health of the platform, to not move to paid SMS carrier relationships in certain markets and, to a lesser extent, GDPR."

These factors reduced MAUs by more than 3 million in Q2, Twitter said. MAUs rose 3 percent year-over-year globally.

Average daily active users climbed 11 percent, faster than the 10-percent growth in Q1, extending the streak of double-digit year-over-year growth to seven quarters.

New tools launched to tackle problem behaviors and efforts to make it easier for people to find and follow breaking news and events — as well as the introduction of machine learning algorithms that help organize conversation around events — have helped the DAU, according to Twitter.

Why It's Important

The social networking platform reported non-GAAP earnings per share of 17 cents in Q2 compared to 8 cents per share one year ago.

Twitter's quarterly revenue rose 24 percent year-over-year to $711 million.

Analysts, on average, estimated EPS of 17 cents per share on revenues of $696.23 million.

Advertising revenues, accounting for about 85 percent of the total, climbed 23 percent to $601 million. Data licensing and other revenue climbed 29 percent to $109 million.

What's Next

Twitter guided Q3 adjusted EBITDA to a range of $215 million-$235 million and the adjusted EBITDA margin to 33-34 percent.

The company expects full-year capital expenditure to fall in a range of $450 million and $500 million.

Related Links:

The Sell-Side Previews Twitter's Q2: Will The Stock's 2018 Rally Continue?

Nomura Downgrades Facebook, Says Stock's Negatives Outweigh Positives