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A Look at Twitter's Trends before Its 1Q17 Earnings Release PART 3 OF 15

Reuters and The Drum reported in March 2017 that European Union (EZU) authorities are pushing Twitter (TWTR), Facebook (FB), and Alphabets (GOOGL) Google to address concerns regarding consumer protections. These companies have reportedly been given ultimatums to amend their user policies within a month or face fines.

None of these companies have publicly commented about the EUs demands. There have been media reports that the companies and EU officials have been in discussions over the policy amendment requirements. However, a deal has yet to be reached.

Among the contentious issues are the requirements that users of these social networks seek legal redress from a California court instead of courts in their home countries.

The other controversial issue is the labeling of sponsored content, which EU authorities want to be clearly labeled so that users can easily identify such content.

Tech giants Facebook and Google have deep pockets. However, for a company like Twitter that is already rattled by tepid revenue growth and a stream of losses, losing money through fines could throw its recovery efforts into disarray.

As you can see from the chart above, Twitter had a net loss of $167.1 million in 4Q16, which was worse than its net loss of $90.2 million in 4Q15.

The EU user policy demands could present another risk for Twitter in that it could create bad blood between the company and authorities in the region. In recent years, EU authorities have appeared to be tough on US (SPY) companies, scrutinizing their activities such as theirtax practices.

Given the serious impact that an EU fine could have on Twitters finances and future in Europe, the companys management would do well to discuss its progress regarding its user policy amendment issue. This kind of clarification could reduce anyuncertainty that could impact the stock.

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The EU's Demands of Social Networking Companies Could Impact ... - Market Realist