Twitter Reveals FTC Fine Could Hit $250M; Analysts Stay Sidelined

A Twitter (TWTR) filing has revealed that it expects the fine from the Federal Trade Commission (FTC) to fall between $150 million and $250 million.

On July 28, Twitter received a draft complaint from the Federal Trade Commission (FTC) alleging violations of the company’s 2011 consent order with the FTC which required Twitter to establish an information security program to protect non-public consumer information.

The allegations relate to the company’s use of phone number and/or email address data provided for safety and security purposes for targeted advertising between 2013 and 2019.

According to the filing “the company estimates that the range of probable loss in this matter is $150.0 million to $250.0 million and has recorded an accrual of $150.0 million.”

The filing continues by adding that the “We expect to continue to be the subject of regulatory inquiries, investigations and audits in the future by the FTC and other regulators around the world.”

The matter remains unresolved, says Twitter, and there can be no assurance as to the timing or the terms of any final outcome.

Shares in the social media platform dropped 2% in Monday’s after-hours trading. Year-to-date however the stock is up 13%, although analysts have a cautious Hold consensus on TWTR’s outlook. That’s alongside a $38 average analyst price target, indicating upside potential of just 4%.

RBC Capital’s Mark Mahaney is one analyst staying on the sidelines. His hold rating on Twitter comes with a $40 price target. He notes that TWTR has experienced a 35% deceleration in its Ad Revenue growth rate from Q4:19 to Q2:20, demonstrating the relatively lower resilience of the TWTR ad model.

Plus he remains concerned that TWTR has under-invested in its platform, as arguably evidenced by its network security/hack problems and the delays in rolling out its MAP (mobile application promotion) product. “A more attractive valuation and/or material signs of traction with SMBs and DR advertisers would make us more constructive” Mahaney concludes. (See TWTR’s stock analysis on TipRanks).

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