Twitter shares dropped over ad sales concerns due to coronavirus

Twitter beat Wall Street’s expectations in its Thursday earnings report, but shares dipped in early morning trading after the company warned of slowing ad sales due to the coronavirus.

The social network’s stock had climbed as much as 11 percent in pre-market trading after it reported a smaller than expected loss amid higher revenue and solid user growth. But shares dropped during its earnings call when chief financial officer Ned Segal signaled the virus is likely to slam its ad business during the current quarter.

Twitter declined to provide guidance for the upcoming quarter, and did not comment on how US ad sales were recovering.

Shares of Twitter were down 2.2 percent Thursday morning, at $30.40.

Unlike Google and Facebook, which both said earlier this week they saw ad spending stabilizing on their platforms, Segal said Twitter has continued to see it weaken. Twitter is especially vulnerable to the cancellation of large events such as the Olympics and March Madness, during which people frequently live tweet commentary.

The coronavirus halted travel, retail and entertainment in much of the world by March, leading to sudden budgets cuts at many advertisers and generating concerns about the prospects of ad sellers.

About 84 percent of Twitter’s revenue comes from ads on its service and partner apps, and those sales were 27 percent lower in the last three weeks of March than the same period in 2019, the company said. But sales bounced back in Asia during late March as lockdowns lifted there, Twitter said, without providing specific figures.

Twitter’s monetizable daily active users (mDAUs) grew 24 percent to 166 million, beating Wall Street’s estimates by 2 million, fueled largely by people flocking to the website to get information about the coronavirus.

Twitter is aiming to stem losses by slashing its own budgets, including by limiting hiring for product development, research and user support. Expense growth in 2020 is likely to be in “the low teens,” versus earlier plans to spend 20 percent more than last year, Twitter said.

Focusing its product teams on advertiser tools could pose challenges for CEO Jack Dorsey, who in February pledged to launch new features for users this year at a faster pace to stoke growth, while committing to activist investor Elliott Management on March 9 that he would increase daily users by at least 20 percent this year.

The growth goal was part of an agreement allowing Dorsey to remain CEO as a revamped board of directors evaluates Twitter’s leadership structure and CEO succession plan. Elliott had expressed concern about Dorsey, who is also CEO of financial tech company Square, spreading himself too thin.

With Post wires

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