USA: Shares of Twitter took a nosedive in early trading Monday, coming after the social network permanently banned Donald Trump — its highest-profile user — prompting worries that might hurt user and revenue growth.
Twitter’s stock dropped the maximum amount as 12% at the market open on Jan. 11, before paring losses somewhat to face at -5% by 1 p.m. ET. This decline has come after a Bull run of Twitter shares within two last two months. Shares of Facebook, which suspended Trump’s Facebook and Instagram accounts until a minimum of his departure from the White House, were down 2.1% at 1 p.m. ET. The Dow and therefore the Nasdaq Composite were down but 1%.
Investors view Twitter’s booting of Trump, alongside the removal of other right-wing accounts, as a possible drag on user growth going into 2021. On Friday afternoon, Twitter issued a permanent ban on Trump, citing his repeated violation of the principles and risks that the outgoing president could incite further violence after the deadly riot at the U.S. Capitol on Jan. 6.
Just like media investors were quick to short Fox Corp.’s stock post-election over fears Fox News Channel will suffer lower viewership after Trump’s loss. Following a similar trend, Twitter is in danger.
Twitter’s daily active users within the U.S. “are still very small and in danger of stalling” with Trump’s exile from the platform, Nathanson wrote. “We have always wondered what proportion of Twitter’s growth came from the ‘Trump Bump’… Now we’ll determine .”
Despite a risk of “churn from the conservative community” for Twitter, “strong political activists will stay Twitter for other content,” Bank of America analyst Justin Post wrote during a research note Monday, maintaining and suggesting a “buy” rating on the stock. Additionally, “we think other Tweeters can replace Trump,” he opined, noting that president-elect Joe Biden’s Twitter account has added quite 4 million followers since he was confirmed because of the winner of the 2020 election in mid-November.
In the fourth quarter, Twitter’s stock climbed over an expected bump in 2021 brand advertising, and therefore the return of events just like the Tokyo Summer Olympics and the NCAA men’s basketball championship, Nathanson noted. But at an equivalent time, the corporate faces increased regulatory risks, and Twitter continues to trail competitors like Facebook in monetizing its user base, the analyst wrote.
Twitter is going to report Q4 2020 results on Feb. 9 after the market closes. The corporate had issued an uncertain ad forecast for the last three months of the year, telling investors in late October, “As we approach the U.S. election… it’s hard to predict how advertiser behavior could change,” noting that within the second quarter of 2020 many brands “slowed or paused” spending in reaction to protests and civil unrest within the U.S.