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Why Twitter Shares Plunged 27% Last Month

By Anders Bylund - Nov 11, 2019 at 12:16PM

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The social media network is losing traction with advertisers while wrestling with technical issues in its ad-management systems.

What happened

Shares of Twitter ( TWTR -2.55% ) fell 27.3% in October 2019, according to data from S&P Global Market Intelligence. The social media veteran posted disappointing third-quarter results late last month, triggering a share price drop of 20% in a single day.

So what

Twitter's third-quarter sales rose 8.7% year over year to $824 million. Adjusted earnings fell 19%, landing at $0.17 per share. The analyst consensus had been looking for earnings near $0.20 per share on revenues in the neighborhood of $874 million.

Management also set up modest guidance targets for the fourth quarter, including a revenue projection centered on $975 million. The average Street forecast for that metric stood at $1.06 billion at the time.

A businessman leans forward to get a closer look at a large red charting arrow crashing down through the floor at his feet.

Image source: Getty Images.

Now what

Twitter's management said that weak third-quarter sales resulted from technical problems with its ad targeting systems. These software bugs reduced the top-line result by approximately 3% and will spill over into the fourth quarter as a 4% headwind to revenue growth.

Fellow Fool Leo Sun called Twitter "an also-ran in the social media race," hexed by soft advertiser interest as well as significant software issues. You won't see me treating this sharp price drop as a buying opportunity, because the social media space really does hold several Twitter alternatives of higher quality.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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