Twitter Inc: Earnings Turn Into a Lousy Anniversary for TWTR


Nearly a year ago, Twitter Inc (TWTR) stock hit the public markets, surging 72% on its first day of trading came public, and within a couple of months, it hit all-time highs of $74.

Twitter stock TWTRWell, TWTR isn’t going to see those numbers again anytime soon. Certainly not after Twitter’s third-quarter earnings report.

TWTR shares are off roughly 10% in aftermarket trading Monday following what appeared to be solid earnings. Revenues more than doubled to $361 million, with mobile ads accounting for about 85% of the total. Twitter also saw lots of strength in foreign markets, with revenues up 176% to $121 million.

Twitter even posted a profit of 1 cent per share — not bad compared to the year-ago period’s 48 cents per share.

But it wasn’t enough to enthuse Wall Street.

That 1 cent per share in earnings merely met the consensus estimate, and while revenues beat the Street, it was only by about $10 million.

Moreover, guidance wasn’t any better, merely landing in range with expectations. Q4 revenues are forecast to hit a range of $440 million to $450 million, with analysts expecting revs of $448 million, so on the high end.

User growth of 23% (to 284 million) was strong, too, but this fell shy of an expected 288 million — and it’s questionable growth, as some of it may have come on a once-every-four-years bump from the World Cup … not efforts to improve the sign-up process or adding features.

It’s true that TWTR has been working hard to find ways to monetize its platform. During the quarter, the company launched ad formats for mobile app installs and videos. Such categories are seeing tremendous growth — something that also has shown up in the results of Facebook (FB) and Google (GOOG). Twitter also is experimenting with mobile commerce and streaming of music.

But these are all things that take time to move the needle. For now, Twitter needs to show growth. And right now, it’s not demonstrating enough.

And if there is some type of deceleration more broadly across the industry, it could bode ill for Facebook, which trades at a plump 85 times next year’s earnings and reports earnings tomorrow.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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