Twit­ter as­suages growth fears for now as shares surge 35%

Viet Nam News - - Markets -

SAN FRAN­CISCO -— Twit­ter Inc halted a slow­down in user-growth in the sec­ond quar­ter with the help of prod­uct tweaks and ser­vices built around the summer’s World Cup, as­suag­ing con­cerns for now that the on­line mes­sag­ing ser­vice had peaked.

Shares of the com­pany soared 35 per cent on Tues­day af­ter it re­ported monthly ac­tive users had risen a bet­ter-than-ex­pected 24 per cent, chalk­ing up what would be its largest gain in a sin­gle day and adding al­most $7 bil­lion to its mar­ket value.

Twit­ter, which has bat­tled to re­verse a steady de­cline in its once-heady pace of growth, sur­passed tar­gets for vir­tu­ally ev­ery met­ric Wall Street scru­ti­nises. Ex­pec­ta­tions had sub­sided ever since the com­pany stunned in­vestors in Fe­bru­ary with dis­ap­point­ingly low user growth.

Be­fore Tues­day’s af­ter-hours surge, Twit­ter had lost about 40 per cent of its mar­ket value since the start of 2014. The com­pany now needs to demon­strate sev­eral quar­ters of re­spectable growth be­fore in­vestors can again back the 10- year- old com­pany ’ s growth story, an­a­lysts said.

“ The ex­pec­ta­tions go­ing in had be­come quite low, ” said Sterne Agee an­a­lyst Arvind Bha­tia. “Even in the US their per­for­mance was good. For now, that will put to rest some of the con­cerns about US growth.”

“One would still have to say that the jury is still out,” Bha­tia said. “You have to look maybe at what hap­pens in the next quar­ter and see if they can con­tinue to have up­side on the user growth.”

Twit­ter saw users in­crease to 271 mil­lion, still dwarfed by ri­val Face­book Inc’'s (FB.O) 1.3 bil­lion. Wall Street an­a­lysts had been ex­pect­ing a pace of growth closer to 21 per cent.

Time­line views, a mea­sure of the en­gage­ment of its users, also ex­ceeded ex­pec­ta­tions with a 15 per cent in­crease, far out­pac­ing the roughly 8 per cent ex­pected.

Twit­ter, whose rapid-fire for­mat has proven pop­u­lar as a com­pan­ion to ma­jor global events, may have en­joyed a boost from the World Cup. The world’s most pop­u­lar sport­ing event peaked with the fi­nals in July.

Chief Ex­ec­u­tive Dick Cos­tolo said in a con­fer­ence call with an­a­lysts on Tues­day that the foot­ball tour­na­ment led ex­ist­ing users to spend more time on Twit­ter but did not con­trib­ute to the rise in new users dur­ing the quar­ter.

For the cur­rent quar­ter, Twit­ter is fore­cast­ing rev­enue of $330 mil­lion to $340 mil­lion, out­pac­ing fore­casts for around $323.7 mil­lion, ac­cord­ing to an­a­lysts polled by Thom­son Reuters I/B/E/S.

Its shares jumped to $51.20 in ex­tended trad­ing, from a close of $38.59 on the New York Stock Ex­change.

Bullish be­liev­ers

User growth has stag­nated since Twit­ter went pub­lic to much fan­fare in Novem­ber. Yet it re­mains val­ued at al­most 200 times earn­ings, based on bullish in­vestors’ be­lief it can even­tu­ally trans­form it­self into an In­ter­net plat­form on the same scale as Face­book.

In­com­ing Fi­nance Chief An­thony Noto set ex­pec­ta­tions high on Tues­day, telling an­a­lysts that he be­lieved Twit­ter can build the “largest au­di­ence in the world.”

Twit­ter ex­ec­u­tives noted sev­eral times on the call that the ser­vice’'s reach is greater than its 271 mil­lion monthly users, cit­ing hun­dreds of mil­lions of other peo­ple who visit the web­site or are ex­posed to Twit­ter con­tent with­out be­ing logged in to the ser­vice.

Some in­vestors ar­gue its re­ported user num­bers do not fully re­flect en­gage­ment, par­tic­u­larly with me­dia view­ers. Oth­ers say its in­her­ently com­plex for­mat de­ters wider adop­tion.

At its peak, Twit­ter en­joyed a $46 bil­lion cap­i­tal­iza­tion on $665 mil­lion of rev­enue in 2013, mak­ing it at the time one of the world’s prici­est stocks.

But in past few months, Twit­ter has granted more prom­i­nent place­ment to pho­to­graphs to liven up its in­ter­face, sim­pli­fied the sign- up process, and al­lowed ads tout­ing mo­bileapp in­stal­la­tions to drive up rev­enue.

It re­ported a 124 per cent jump in quar­terly rev­enue to $312 mil­lion, beat­ing ex­pec­ta­tions for $283.1 mil­lion. It posted non-GAAP net in­come of $14.6 mil­lion or 2 cents a share, re­vers­ing a loss of $ 16.4 mil­lion or 12 cents a share a year ear­lier. —

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