Twitter Stock Is Trading at a 44% Discount despite Gains

Twitter (NYSE:TWTR) stock fell more than 18% last week the amid coronavirus-driven sell-off in stocks. However, the stock started this week on a positive note. Twitter shares gained more than 3.0% on Monday. On Tuesday, the shares rose 4.70% and closed at $25.85.

Even with the recent gains, Twitter stock is still trading at a steep discount. At the closing on Tuesday, the stock was trading at a 44% discount to its 52-week high of $45.85. Facebook (NASDAQ:FB) stock, which has also borne the brunt of coronavirus sell-off, closed Tuesday at a 28% discount to its 52-week high. The stock of Google parent Alphabet (NASDAQ:GOOGL) was trading at a 26% discount to its 52-week high at the closing on Tuesday.

The coronavirus pandemic is devastating businesses around the world. Twitter has felt the impact. In addition to hitting Twitter stock, the virus pandemic has lowered the demand for its advertising services.

To curb the spread of the deadly coronavirus, authorities around the world have put cities and states in lockdown. On top of this, businesses like airlines, hotels, and restaurants have either shut down or significantly reduced their operations.

The situation has impacted the marketing industry. Many businesses have paused advertising or cut their budgets. As a result, the changes have hit companies’ revenue flow. For Twitter and Facebook, selling ads is their main business. In fact, Facebook COO Sheryl Sandberg warned that the coronavirus could have a serious impact on the global marketing industry. Investors dumped Twitter and other stocks due to fears that the virus situation could have a negative impact on their financial results.

Advertising sales contribute more than 80% of Twitter’s total revenue. The coronavirus pandemic has reduced the demand for advertising. As a result, Twitter’s advertising sales have taken a major hit.

Twitter plans to downgrade its revenue and profit expectations for the current quarter. The company expects its first-quarter revenue to fall YoY (year-over-year). Previously, the company expected its first-quarter revenue to grow as much as 12.5% YoY to $885 million. Also, Twitter expects to report an operating loss in the first quarter. The company expected an operating profit of as much as $30 million.

Although the coronavirus pandemic has cut the advertising demand, the situation has actually boosted the demand for information. As a result, Twitter is seeing a big spike in usage. The company has added about 12 million daily users since the beginning of the year. Now, Twitter has 164 million daily users. The company is within striking distance of its target for about 182 million daily users by the end of the year based on its agreement with hedge fund Elliott Management.