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Here's Why Twitter Stock Fell 13% in April

By Jon Quast - May 4, 2021 at 2:57PM

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The company is pursuing subscription-based revenue going forward, but for now the market is disappointed with guidance.

What happened

Shares of Twitter (TWTR 2.25%) fell 13.2% in April, according to data provided by S&P Global Market Intelligence. Looking at the chart, the entirety of the drop came in the month's final day -- the day after the company provided forward guidance that disappointed investors.

So what

On April 29, Twitter released financial results for the first quarter of 2021. And results were good. Q1 revenue was up 28% year over year as the company excelled with its ad-display business. Monetizable daily active users were up 20% from the previous year to almost 200 million. And it even generated a net profit of $68 million compared to a net loss of $8 million last year.

A rising red arrow breaks near the top, resulting in the tip of the arrow pointing down over a city skyline

Image source: Getty Images.

Therefore, it's safe to say Twitter's Q1 results were good. However, investors didn't like the guidance. Management expects second-quarter revenue to be flat compared to Q1. And it also expects expenses to rise as it increases its employee head count. Wall Street didn't like this guidance, either. Most analysts cut their price targets for Twitter stock shortly after the company provided its outlook.

Now what

Going forward, Twitter is looking to add subscription-based services to go with its predominately ad-based revenue. To that end, news broke today that the company is acquiring Scroll, a subscription-content platform. While more details will come in time, for now it's clear that Twitter is trying to find new ways to monetize its platform. And that should have long-term investors optimistic about the future.

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