Twitter Inc

NYSE:TWTR   4:00PM EDT
38.68
+0.84 (+2.22%)

People also watch

Why, Exactly, Twitter Stock Ripped Off of Earnings

Why, Exactly, Twitter Stock Ripped Off of Earnings



Why, Exactly, Twitter Stock Ripped Off of Earnings



Date Published:

Disclaimer

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories ("The Company") does not engage in rendering any legal or professional services by placing these general informational materials on this website.

Preface

Twitter stock ripped off of earnings reported on 4-23-2019 before the market opened with a surprise beat on several levels. But, there may be some risk lurking.

 

Story

Twitter (TWTR) reported revenue of $787 million versus analyst expectations of $773.5 million and adjusted EPS of $0.37 versus analyst expectations of $0.15. Advertising revenue climbed to $679 million, a 18% year-over-year rise. While higher revenue on better cost controls led to the EPS beat, the real reason the stock is ripping so hard goes much deeper than the financials.

Monthly active users (MAUs) rose to 330 million, up from 321 million the prior quarter.  While the 330 million number is lower than the same period last year (336 million), Wall Street had all but accepted Twitter's fate of a shrinking or stable, at best, ecosystem with expectations for MAUs coming in at 319 million. If the Twitter story goes from a "engagement " story (higher Daily Active Users (DAUs) with MAUs shrinking means engagement is ring but growth is not), to a growth story, all of a sudden the multiples on earnings and sales will see an expansion. If we take EPS higher than expected and a multiple expansion, then we get what we see today -- a serious rip. 

 

The Risk 

Twitter noted that the improvement in all of the metrics is due to the companies diligent work on making the platform less toxic. The company noted that the result of weeding out spam and abusive posts and targeting ads better brought about this turnaround.  If true, then Twitter may be at the start of new a growth cycle and that would be an incredible reversal of fortunes, but let's not get the cart out in front of the horse just yet. While MAU growth is the gem in the report, investors won't see that again because Twitter will stop reporting the metric as of now -- that doesn't sound like a company that is willing to show off user growth quite yet.

Further, the company's guidance for next quarter was between $770 million and $830 million, so that mid point of $800 is significantly lower than Wall Street estimates of $818 million.  Twitter may be a wonderful turn around story, and if it is, it could head back to its long-time all-time high of over $80. But with a refusal to report MAUs and guidance below the street, maybe we don't quite know direction of the trend, if the trend is one quarter. For now, the Twitter bulls have reason to cheer, and the stock has reason to rise.



10 Stocks We LIke Better Than Twitter
It's understanding technology that gets us an edge to find the "next Apple," or the "next Amazon." This is what CML Pro does. We are members of Thomson First Call -- our research sits side by side with Goldman Sachs, Morgan Stanley and the rest, but we are the anti-institution and break the information asymmetry.

The precious few thematic top picks for 2018, research dossiers, and alerts are available for a limited time at a 80% discount for $29/mo. Join Us: Discover the undiscovered companies that will power technology's future.

The author has no position in Twitter at the time of this writing.

Thanks for reading, friends.

Legal The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories ("The Company") does not engage in rendering any legal or professional services by placing these general informational materials on this website.

The Company specifically disclaims any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if we have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

The Company makes no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that The Company endorses, sponsors, promotes or is affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.