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Here's Why Twitter (TWTR) Stock Dropped Today

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Shares of Twitter (TWTR - Free Report) were down more than 5% in early morning trading Monday after reports suggested that the social media company has suspended more than 70 million accounts during May and June.

That figure was first reported in an investigative piece from The Washington Post which detailed Twitter’s recent efforts to “lessen the flow of disinformation on the platform.” Data obtained by The Post reportedly showed that Twitter has been suspending more than 1 million accounts per day in recent months. This suspension rate was later confirmed by Twitter, The Post said.

What’s more, an anonymous person familiar with the situation cited by The Post mentioned that the removal of unwanted accounts may result in a rare decline in Twitter’s monthly active user (MAU) count for the second quarter.

Twitter, like domestic social media peer Facebook (FB - Free Report) , has faced scrutiny after its platform was used as a tool in Russia’s disinformation campaign during the 2016 U.S. elections. Among other things, a so-called “troll factory” based in St. Petersburg used platforms like Twitter to deceive voters and exacerbate tensions among the public.

Twitter’s aggressive removal of harmful or fraudulent accounts underscores a company-wide shift for the San Francisco-based firm, which long resisted content curation in favor of operating a totally free speech platform.

Management has suggested that Twitter’s crackdown would not have a significant impact on the platform’s MAU total—which was at about 336 million at the end of Q1—but The Post said its data creates questions about the company’s previous estimates.

“But Twitter’s increased suspensions also throw into question its estimate that fewer than 5 percent of its active users are fake or involved in spam, and that fewer than 8.5 percent use automation tools that characterize the accounts as bots,” wrote Craig Timberg and Elizabeth Dwoskin.

Investors might also be concerned that Twitter’s user crackdown is adding to the company’s labor costs. We have seen Facebook increase its headcount and ramp up spending to counteract abusive behavior, and it seems logical that Twitter might face similar headwinds.

But up to this point, earnings trends have been favorable for Twitter’s second quarter. The Zacks Consensus Estimate for the period has trended five cents higher over the past 90 days, with analysts now calling for adjusted quarterly earnings of 17 cents per share.

This result would represent year-over-year growth of 112.5%. Revenue estimates are projecting net sales of $700 million, which would mark growth of 22.0& from the prior-year quarter.

Twitter is expected to announce its Q2 results before the market opens on July 27.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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