If you want to lose money, then investing ahead of every Twitter Inc (NYSE:TWTR) earnings report is a pretty good play. Twitter stock is off nearly 10% in Tuesday’s early after-hours action, after yet another shoddy report.
Twitter’s adjusted earnings of 13 cents per share actually beat expectations (10 cents) for the second quarter, but revenues underperformed. Sales of $602 million represented 20% year-over-year growth — Twitter’s slowest revenue pace since it came public in 2013.
During the past couple weeks, analysts had been taking down the estimates on Twitter earnings. So yes, the bar was far from high. But investors didn’t seem to pay much mind as TWTR stock was bid higher as the report approached.
But the thing that really was pushing Twitter stock into the ground, though, was horrible guidance on the top line. TWTR now sees revenues in a range of $45.5 million to $47.5 million, missing expectations of $45.8 billion.
A turnaround is far from near.
User growth continued to be sluggish, with monthly active users up just 3%. This has certainly been a big-time issue for TWTR stock, helping to wipe out 75% of the value since the 2014 highs.
How bad have things gotten? Twitter has stopped providing daily active user numbers — which is probably a smart strategy, if its monthly active users are any indication. At 313 million MAUs, Twitter has less than a fifth of Facebook’s 1.65 billion monthly active users, and it’s also well behind Snapchat and Facebook’s Instagram.
In light of the user problems, it should be no surprise that advertisers are focusing their budgets on larger, faster growing platforms like Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Snapchat. According to the TWTR Q2 report:
“We’re seeing a continuation of the trends discussed last quarter with less overall advertiser demand than expected.”
Keep in mind that — on Monday — Twitter announced that it had made deals with both Major League Baseball and the National Hockey League to offer a package of live streaming video. The “package” as of now is reported to be just one out-of-market game weekly, and there’s no timetable for when this new feature will be offered. But it does mark a defined strategy for TWTR, which also formed an agreement with the NFL to show Thursday night games this year, and will also show exclusive content from the NBA.
This, as well as its deal with CBS Corporation (NYSE:CBS) to stream the recent Republican and Democratic national conventions, are all part of a drive to bring user engagement back to the social media platform.
But these moves may not mean much for Twitter stock. The terrible guidance is a sign that streaming deals will likely take time to move the needle.
At this point, the best hope for shareholders of Twitter stock is a buyout. The good news is that M&A activity has bubbled up lately, specifically Microsoft Corporation’s (NASDAQ:MSFT) $26 billion acquisition for LinkedIn Corporation (NYSE:LNKD). And given the harsh selloff in Twitter stock tonight, there might be more urgency than ever to consider a deal.
It’s a good bet the Wall Street is reaching the limits of patience with this company.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
