Twitter Inc: Q3 Earnings Just the Latest Reason to Hate TWTR Stock

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Twitter Inc (TWTR) earnings reports are a quarterly game of Russian roulette.

TWTR twitter stock price twitterExcept in this game, there seems to be a bullet in every chamber.

TWTR stock was off big (about 12%) in Tuesday’s after-hours trading on disappointing user numbers — a poor start for new CEO Jack Dorsey, who was overseeing his first earnings call since taking the reins on a permanent basis this summer.

Twitter Q3 Earnings

The basic third-quarter numbers were nothing to cry about. Non-GAAP earnings came to 10 cents per share, beating Wall Street expectations of 5 cents per share. Meanwhile, revenues of $569.2 million were up 58% and beat the consensus expectation for $559.6 million.

No, what really spooked TWTR stock holders (at least on the financial side) was the forecast. Twitter now expects revenues of $695 million to $710 million in Q4, well short of average Street estimates for $739.7 million.

Also worrying investors in Twitter stock is the user growth — or lack thereof.

In the latest quarter, Twitter reported 320 million monthly active users. Not only was that short of the consensus estimate for 324 million, but it represented just more than 1% growth on a sequential basis.

Worse, this happened despite Twitter’s forging of a substantial distribution agreement with Alphabet (GOOG, GOOGL) as well the launching of a new media offering, Moments. But so far, Dorsey’s efforts have gained little traction.

Keep in mind that in Q2, CFO Anthony Noto said, “We do not expect to see sustained meaningful growth in MAU until we start to reach the mass market. We expect that will take a considerable amount of time.”

TWTR stock holders had ample warning.

Still worrisome is the fact that Dorsey has another job as CEO of Square. And that second gig is sure to take up a lot of time considering the Square IPO will be kicking into gear within months.

So it’s fair to wonder whether Dorsey can devote enough time to right the teetering Twitter ship.

Don’t Bank on a Turnaround in TWTR Stock

Turnarounds are difficult and often fail — and that’s twice as true in tech, where the world is simply moving much faster. When they do work, they get the full attention of the CEO. Look at Facebook’s (FB) Mark Zuckerberg. His company was a big-time laggard in mobile just a couple of years ago, but thanks to a laser focus and bold actions, the organization moved swiftly and executed a stellar comeback.

Something else: While the mobile revolution is real and should grow for some time, the winners could very well end up being limited to just mega-operators like Facebook and Alphabet — companies with the tremendous scale it takes for ad campaigns to get strong returns. Advertisers have little incentive to consider second-tier players like Twitter.

In other words, it’s tough to get excited about TWTR stock.

If you want to hang your hat on something, Twitter might be near a floor simply because of the potential for a buyout, and given the recent coziness with Google, it’s reasonable to believe Alphabet might one day make a play for TWTR.

But for now, that’s hardly enough reason to go speculating in TWTR.

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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Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2015/10/twitter-inc-twtr-stock-q3-earnings/.

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