Why Did Twitter Fall 5.8% Yesterday?

Share of the social media platform Twitter (TWTR) fell 5.8% on October 4 to close at $58.39, after a massive global outage hit Facebook (FB) and its subsidiaries, Instagram and WhatsApp.

Later, Twitter shares modestly recovered after-market and were up 1.1% in extended trading hours.

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Users Switch to Twitter as Facebook Crashes

Facebook suffered an almost six-hour outage on Monday. Its 3.5 billion users were unable to send or receive messages via its social media and messaging services WhatsApp, Instagram, and Messenger. Facebook said a faulty configuration change was the primary cause of the outage.

As a result of the outage, numerous users switched to Twitter searching for updates and reasons for the unexpected global outage.

Twitter was bombarded with tweets from users that included complaints, jokes as well as memes. In response, the company sent out a tweet saying, “Hello literally everyone,” as if it enjoyed the diverted attention to its app.

In fact, in one of the tweets, Twitter’s CEO Jack Dorsey posted “How much?” in a reply to a tweet that mentioned that the domain FaceBook.com is now for sale.

Eventually, Facebook also resorted to using its official page on Twitter to update its users on the outage, as it was unable to use its own platform. Facebook’s spokesperson, Andy Stone, posted on her personal account as well as on the official Facebook page on Twitter, saying, “We’re aware that some people are having trouble accessing our apps and products.”

Instagram and WhatsApp soon followed suit, and posted similar updates on their respective official Twitter accounts.

Investors Unimpressed

Nonetheless, Twitter stock continued to fall, as it has been doing since October 1. That is partially in response to its two most recent analyst ratings, both of which were Sells.

On September 13, Goldman Sachs analyst Eric Sheridan gave Twitter a Sell rating and a price target of $60 (2.8% upside potential). The analyst has a “selectively positive view” on the U.S. internet sector. However, regarding Twitter, the analyst believes that the advertising recovery is already priced in at current levels and its innovation is a “show me story.”

Similarly, on August 23, Arete Research analyst Rocco Strauss reiterated a Sell rating, calling Twitter the weakest spot among the various social networking platforms. He raised the company’s price target from $30 to $33, implying a downside of 43.5%. The analyst is skeptical about Twitter meeting its 2023 sales target of $7.5B.

Furthermore, yesterday’s Facebook outage might have reinforced investors’ impression of Twitter as the choice of last resort in social media platforms. It’s true that more people turned to Twitter yesterday, but that was only because Facebook and its subsidiaries were unavailable for use.

Twitter Average Analyst Ratings

The majority of analysts rating Twitter are similarly unimpressed by the company’s prospects. According to TipRanks’ analyst rating consensus, TWTR stock comes in as a Hold. Out of 23 analyst ratings, there are 6 Buy, 13 Hold, and 4 Sell recommendations. The average Twitter analyst price target of $71.38 implies 22.3% upside potential from the current levels.

Disclosure: At the time of publication, Devina Lohia did not have a position in any of the securities mentioned in this article.

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