Stunted user growth wrecks Twitter earnings
Twitter, Inc. (NYSE: TWTR) reported its third-quarter earnings after the market closed on Monday as $0.01 in earnings per share and $361 mln in revenue against Thomson Reuters consensus estimates of $0.01 in earnings per share and $351.35 mln in revenue.
The company has guidance for the fourth quarter of $440-450 mln in revenue. The consensus earnings estimate for revenue in the fourth quarter is $448.18 mln. On the 2014 full year, Twitter expects revenues of $1.36-1.37 bln against a consensus estimate of $1.36 bln. Net income for the third quarter was $6.97 mln compared to a net loss in the third quarter of the previous year of $17.2 mln.
Average Monthly Active Users (MAUs) totalled 284 mln for the third quarter which was an increase of 23% year over year. The average mobile MAUs represented about 80% of all MAUs.
Sequential growth in monthly users slowed from 6.3% in the second quarter to 4.8% in the third quarter. The 284 mln MAUS was toward the low end of the analysts’ estimate of 280 to 288 mln.
Timeline views reached 181 bln for the third quarter, recording an increase of 14% year over year. Advertising revenue per thousand timeline views reached $1.77 which was an increase of 83% from last year.
Revenues were distributed over these segments: advertising revenue totalled at $320 mln and mobile advertising revenue made up 85% of it; data licensing and other revenue totalled $41 mln, an increase of 171% from the previous year; international revenue totalled at $121 mln, 34% of total revenue and an increase of 176% from the previous year.
Brand Keys ranked Twitter in the top 20 brand loyalty leaders. This list spanned 65 product categories and 721 brands. The list noted that out of the top 20 stocks, only one was not a tech company.
“We had another very strong financial quarter. I’m confident in our ability to build the largest daily audience in the world, over time, by strengthening the core, reducing barriers to consumption and building new apps and services,” said Dick Costolo, CEO of Twitter.
Citigroup initiated coverage on Twitter with a Neutral rating and a $53 price target, on October 21. Twitter was raised to Overweight from Neutral and the price target was set at $64 (versus a $50.06 closing price) at J.P. Morgan, on October 2. The call was based on a belief that Twitter will continue to add new users and that it will be able to monetise the shift toward mobile advertising.
Shares of Twitter closed on Monday down 2.7% at $48.56. Following the earnings report, the initial reaction in the after-hours market has been negative and shares were down over 9% at $44.12.
The company’s stock has a consensus analyst price target of $54.82 and a post-IPO trading range of $29.51 to $74.73. It has a market cap of around $29 bln.