Twitter’s stock plunges on weak user numbers

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Twitter said the decline in the third quarter would be in the mid-single-digit millions, suggesting a sequential decline to around 330 million users. However, in the second quarter, revenue rose 42% to $13.2 billion.

The service's plethora of product updates and push into live video streaming have made Twitter less cumbersome to use, driving advertising revenue and profit in the second quarter. Though revenue was up sharply and Twitter's profit surged compared to its loss in the year-ago quarter, headwinds with user growth as the company deletes "spammy and suspicious" accounts spooked investors.

But some say Twitter's unique position as a real-time network that allows users to follow news and events will eventually pay off. RBC Capital Markets analyst Mark Mahaney said in a note this week that "Twitter operates one of the largest and most influential social networks now in existence", and it is "providing meaningful value to users".

The stock's decline comes just after the company reported its second-quarter results. The company doesn't disclose the total number of daily users.

On Friday, the social media network said its monthly users during the second quarter reached 335 million across the globe, which were down from the prior quarter of 336 million.

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"These efforts contributed to healthy year-over-year daily active usage growth of 11 per cent and demonstrate why we're investing in the long-term health of Twitter".

Removal of fake accounts, which recently happened, was not reflected in the Q2 numbers.

Facebook and Twitter each have hundreds of millions of users, with Facebook clearly in the lead. That company is battling privacy controversies and rising regulation in Europe while also implementing costly new measures to battle disinformation on its platform.

Revenue of $711m, mostly from advertising and up 24% from past year, exceeded the average estimate of $696 million among analyst research aggregated by Thomson Reuters.

Twitter's relations with advertisers have been strained by concerns about phony accounts bought by users to boost their following.

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"Investors are overreacting to (monthly active user) trends", BTIG analyst Richard Greenfield said about the share fall.

Earnings excluding items were 17 cents per share, in-line with analyst estimates. "When we do focus on removing some of the burden of people reporting or blocking or muting, we do see results in our numbers".

The social network blamed the fall in numbers on its focus to clean up Twitter by removing spam accounts, as well as the arrival of GDPR, the new data protection regulation introduced by the European Union in May. It was attacked for allowing third parties access to user data. The capital expenditure is put to be between the range of $450 million to $500 million, an increase from a previous estimate of $375 million to $450 million.

Yet the market had more than doubled Twitter's value over the past year to $32 billion, and the valuation to 50 times estimated earnings.

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