Twit­ter re­sults need to wow to re­as­sure in­vestors

The Pak Banker - - COMPANIES/BOSS -

When Twit­ter Inc re­ports re­sults on Wed­nes­day, a less than stel­lar show­ing could ham­mer the stock fur­ther as a broad sell­off in the tech­nol­ogy sec­tor has made in­vestors jit­tery. Twit­ter's shares have lost more than two-thirds of their value in the past 12 months.

Sev­eral tech stocks with lofty val­u­a­tions have plunged in the past few days af­ter dis­mal sales out­look from LinkedIn Corp and busi­ness-an­a­lyt­ics com­pany Tableau Soft­ware fu­eled growth fears for the en­tire sec­tor. "I think the prob­lem is that in the cur­rent mar­ket any sign of a weak out­look will be quite harshly pun­ished," At­lantic Eq­ui­ties an­a­lyst James Cord­well said. In­vestors want to see Chief Ex­ec­u­tive Jack Dorsey's strat­egy to reignite growth in user num­bers. Twit­ter re­ported an 11 per­cent growth in ac­tive monthly users in the third quar­ter to 320 mil­lion, the slow­est growth since the com­pany went pub­lic in 2013. But one ef­fort, Mo­ments, which show­cases Twit­ter's best tweets and con- tent, has failed to take off as ex­pected, an­a­lysts have said.

Twit­ter is also plan­ning to re­order tweets to pri­or­i­tize those it be­lieves more users will want to see, Buz­zFeed re­ported on Fri­day. Many users de­cried the re­ported plan, with the hash­tag #RIPTwit­ter be­com­ing the top trend­ing U.S. item on Twit­ter on Satur­day. Twit­ter has been crit­i­cized for try­ing to be­come more like Face­book Inc, which has been grow­ing at

a much faster rate and re­ported 1.59 monthly users in Jan­uary.

"We ex­pect only mod­est se­quen­tial user growth (for Twit­ter) in 2016, likely 1 per­cent per quar­ter," Wed­bush Se­cu­ri­ties an­a­lysts wrote in a pre­view note on Fri­day. An­a­lysts ex­pect Twit­ter to re­port earn­ings of 12 cents per share on rev­enue of $709.9 mil­lion, ac­cord­ing to Thom­son Reuters I/B/E/S. An­other lin­ger­ing con­cern has been Dorsey's dual role of run-


ac­tive ning Twit­ter as well as mo­bile pay­ments com­pany Square Inc.

Dorsey, who be­came in­terim CEO in July and then CEO in Oc­to­ber, has called for "bold re­think­ing" about the com­pany but has not yet clar­i­fied what that means. Dorsey has also moved to re­struc­ture the com­pany by lay­ing off more than 300 em­ploy­ees and mak­ing mar­quee hires, no­tably that of for­mer Google ex­ec­u­tive Omid Kordestani as ex­ec­u­tive chair­man. But four se­nior ex­ec­u­tives have quit the com­pany in the past few months, adding an­other con­cern about the com­pany's abil­ity to restart growth. "We be­lieve that had Mo­ments been an early suc­cess, the ex­ec­u­tives would not have left so soon, vol­un­tar­ily or oth­er­wise," Wed­bush an­a­lysts wrote. As of Mon­day, Twit­ter shares were trad­ing at 25.7 times for­ward earn­ings, shy of Face­book's 30.4. "Why would you in­vest in some­thing like a Twit­ter when Face­book is on a sim­i­lar val­u­a­tion with a stronger tra­jec­tory - that's the kind of ques­tions in­vestors are ask­ing," Cord­well said.

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