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Twitter shares rise despite a second-quarter earnings miss

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Yahoo Finance Live co-hosts Rachelle Akuffo, Dave Briggs, and Jared Blikre examine Twitter stock following the social media company's second-quarter earnings miss and ongoing buyout deal with Elon Musk.

Video Transcript

RACHELLE AKUFFO: And speaking of that, we're going to chat about that because Twitter's second quarter results came out this morning, missing analysts' estimates on earnings, revenue, and user growth. Now, apart from slowing ad revenue that social media companies overall are battling, the biggest issue-- uncertainty with Elon Musk's acquisition of Twitter. Now, it's also why there was actually no forward guidance. In a statement, Twitter said, "Given the pending acquisition of Twitter by an affiliate of Elon Musk, we will not host an earnings conference call, issue a shareholder letter, or provide financial guidance."

Now, since offering to buy Twitter back in April, the stock tumbled more than 15%, along with Musk's very public misgivings about his issues with the Twitter bots. So let's talk about this, guys. Obviously, Dave, as we take a look at this, poor Twitter, you want to say, seeing its performance in those last three months really tanking and sort of everyone wondering what happens next. Where does this company go from here?

DAVE BRIGGS: Well, it's amazing, right, the dichotomy we're seeing in this stock price right now. Biggest revenue miss ever, and shares are up. I have only one guess here, Jared, and it's that investors are simply betting that Elon Musk gets his butt kicked in a Delaware court, and that will keep those who have bet-- that made the arbitrage bet and pay off. How else can you explain this stock being up?

JARED BLIKRE: I can't explain it being up other than we're in a bear market right now, and that's what stocks do. They rise on a lack of worse news than the market was expecting. So the bar was extremely low. They failed to meet that by a landslide. And guess what? Everybody's thinking the Fed is going to pivot in a few quarters. Let me just go through some of these numbers.

Gross margin, 64.3% was the estimate. They missed that by about 800 basis points. Research and development, well, they're spending 400 more basis points on that. That's a lot of money. What are they doing? Well, it's a black box because no forward guidance. And then we have general and administrative, that was supposed to be about 11%. Came in close to 15%. What are they spending all this money on? Is it lawyers to go to the chancery court? I don't think so.