Twitter’s stock plunges nearly 21% after it reports a decline in users

Twitter Inc.’s stock plunged nearly 21% on Friday after the social-media company said its average monthly users fell in the second quarter and would decline further this year as Twitter removes fake and abusive accounts.

The stock fell $8.82 to $34.12 a share, erasing $6.6 billion of Twitter’s overall stock-market value. It was the second worst single-day percentage drop for the company since it went public in 2013.

The drop marked an abrupt reversal for Twitter’s shares, which had soared 119% in the 12 months prior to the San Francisco-based company releasing its quarterly financial report.

Twitter’s decline came one day after the stock of Facebook Inc., the nation’s largest social-media concern, plummeted 19% due to that company’s slowing growth rates. The drop wiped $120 billion from Facebook’s market value, the largest daily dollar decline in history for a U.S. company.

Both companies have faced heightened criticism this year over concerns about users’ data privacy, fake and abusive accounts, and Russian efforts to use the platforms to influence the 2016 U.S. presidential election.

Twitter has stepped up its effort to purge unwelcome accounts so that “the conversation on the platform is healthier,” Twitter Chief Executive Jack Dorsey told analysts on a conference call Friday.

“We launched new tools to address behaviors that distort and detract from the public conversation and introduced new measures to handle spam, malicious automation and platform manipulation,” he said. Twitter, like others, also has been adapting to Europe’s tough new privacy law.

As a result, the company’s monthly average users worldwide in the second quarter fell to 335 million, down 1 million from the first quarter.

It was the measure’s first drop since the second quarter of 2017, and it also fell short of the 339 million Wall Street expected, analyst Mark Mahaney of RBC Capital Markets said in a note to clients.

Twitter also said it expected the decline to continue in the current third quarter by an amount in the “mid-single-digit millions” at the same time its costs are growing in part to improve the quality of its site.

The outlook “was clearly weaker than expected as Twitter expects operating expenses to rise” in the second half of the year, Mahaney said.

Despite the user slowdown, Twitter said its second-quarter revenue — aided by ad revenue related to the World Cup soccer games — jumped 24% from a year earlier to $710.5 million, which beat analysts’ expectations.

Twitter posted a profit of $100.1 million, which included a $42-million tax benefit, compared with a $116.5-million loss a year earlier.

It was the company’s third consecutive profitable quarter.

Twitter’s per-share profit, after one-time adjustments, was 17 cents a share, in line with estimates from analysts polled by FactSet Research Systems Inc.

Scott Kessler, an analyst with CFRA Research, said in a note to clients that Twitter was “making investments to promote better overall user experiences and to increase user engagement.”

Nonetheless, he called Twitter’s stock “reasonably valued” even after its dramatic drop Friday, which still left Twitter with a 103% gain over the last 12 months.

UPDATES:

2:25 p.m.: This article was updated throughout with staff reporting, including closing stock prices and comments from analysts.

9:45 a.m.: This article was updated with Twitter’s stock movement.

6:55 a.m.: This article was updated with Twitter’s stock movement.

This article was originally published at 5:45 a.m.