It’s not been a good week for those investing online in social media giants as Twitter’s share price today mirrored Facebook’s Thursday crash by also shedding 20%. The Facebook sell-off followed Q2 figures that showed user growth had dropped to a new, significantly lower, record low and total user numbers in Europe had declined by 1 million. Slowing revenue growth was also signalled in forward guidance for upcoming quarters. Twitter’s own report showed a drop in total user numbers over the second three months of the year.
Twitter put the drop in overall user numbers down to a recent company policy of purging spam and bot-controlled accounts, rather than any drop in ‘natural’ user numbers. Optimists will hope, like Facebook’s claim that its slowdown is a temporary repercussion of improving its platform long term, the move will lead to stronger long term sustainability. Chief executive and co-founder Jack Dorsey stated confidence that the company’s future would:
“Reflect the work we’re doing to ensure more people get value from Twitter every day”.
While the micro blogging platform’s number of active users was 9 million up on the same time last year at 335 million, it was one million down on the first quarter of 2018. Daily active users were up 11% on Q2 2017. 3 million ‘fake users’ were reported to have had accounts deleted since Q1, which would suggest a real addition of 2 million new users. However, the ongoing purge of spam accounts was forecast to extend to another tranche of ‘mid-digit single millions’ being removed over coming months.
Though the headline figure of a fifth of the company’s overall capitalisation sounds dramatic, it has to be taken within the context of big recent gains. Today’s losses only bring Twitter’s share price back to where it was in early June before huge amounts of capital poured into the Fang+ index of big tech stocks. Markets have been treating them as a safe haven from trade war fears provoked by U.S. president Donald Trump’s aggressive approach to introducing new tariffs on imports. One interpretation is that the losses suffered by Facebook and Twitter this week are little more than a temporary correction that reverses huge recent value gains that were completely detached from both companies’ fundamentals.
So far Facebook and Twitter’s share price rout has not proven to be contagious. Amazon posted record net income for Q2 in its own report yesterday. Along with Alphabet (Google), Apple and Microsoft, Amazon is still dragging markets higher despite this week’s trauma for the social media giants. The Financial Times has speculated that the ‘Faang’ constellation may now be long in the tooth and set to be replaced by ‘Maga’ – Microsoft, Apple, Google and Amazon.
Twitter’s share price was $34.77 as lunch time approached in the USA, down from Thursday’s closing price of $42.94.