Even Twitter Sees a COVID-19 Drag on Part of Its Business

It is no secret that the coronavirus pandemic is making major changes to the world. Where things get interesting about COVID-19’s impact on business is that there are almost no places to hide, not even in social media that should be seeing much more activity of late. Twitter Inc. (NYSE: TWTR) is a company that should be getting much more attention during the pandemic mania. That said, and perhaps more important that the volume, is that Twitter’s ad rates are at risk.

Twitter announced on Monday after the close of trading that it was withdrawing its revenue and operating income guidance for the first quarter of 2020. The company also announced that it was withdrawing its outlook for expenses, stock-based compensation, headcount, and capital spending. The company blamed “the growing impact of COVID-19 on the global operating and economic environment and their effect on advertiser demand.”

One issue that was brought up was that the financial impact of this pandemic is rapidly evolving and difficult to measure. As for the projected impact and on the current visibility, Twitter now sees first-quarter revenues to be down slightly on a year-over-year basis. The first quarter of 2019 saw Twitter post $786.9 million in quarterly revenues, and the Refinitiv consensus estimate was last seen at more than $869 million in revenues.

Twitter also noted that it should see a GAAP operating loss, even as lower expenses resulting from COVID-19 disruption are unlikely to fully offset the revenue impact of the pandemic in the first quarter.

The company’s total monetizable daily active users (mDAU) has risen to approximately 164 million. That is up 23% from the 134 million in the first quarter of 2019 and it is up 8% sequentially from the 152 million added in the fourth quarter of 2019.

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While some will not be surprised about Twitter’s news, it is important to realize that Twitter shares initially rose more than 15% on February 6 after it gave guidance along with earnings. The shares closed at $33.39 ahead of that morning earnings report and closed at $38.41 on that same day. Even with a 3% gain on this same day, the shares closed at $24.68.

Jack Dorsey, Twitter’s chief executive officer, said:

Twitter’s purpose is to serve the public conversation, and in these trying times our work has never been more critical. We’re seeing a meaningful increase in people using Twitter, and our teams are demonstrating incredible resilience adapting to this unprecedented environment. We’ll continue to navigate this environment focusing on supporting our employees, customers, and partners, while strengthening our service for everyone around the world and adjusting to a new operating and economic environment.

Ned Segal, the company’s chief financial officer, said:

Twitter had a strong start to the year before the effects of COVID-19 began spreading more broadly, including a successful Super Bowl and overall strength in the US. The COVID-19 impact began in Asia, and as it unfolded into a global pandemic, it has impacted Twitter’s advertising revenue globally more significantly in the last few weeks. We have made solid progress on our consumer and revenue product priorities and we remain confident in our opportunity and strategy. We hope everyone stays healthy and safe.

Twitter said that it would update its figures on the morning of April 30 when it announces earnings.

It was just this same morning that Citigroup reiterated its Neutral rating and cut its target price down to $27 from $35.

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