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LIVE: Twitter Plunges After Earnings On Weak User Growth

Dick CostoloREUTERS / Stephen LamTwitter CEO Dick Costolo.

Twitter just reported its first-ever post-IPO earnings:

  • Revenues: $US242.7 million, up 116%.
  • Earnings per share: +2 cents

That’s a huge beat: Analysts had been expecting EPS of -2 cents on revenues of $US217.82 million.

But the stock collapsed 13% immediately because of this metric:

  • Monthly active users: 241 million.

Twitter only added 9 million more users since the last quarter — that is very anemic growth. But the company now gets 75% of its total ad revenue from mobile. Twitter is basically a mobile app company at this point, not a desktop company.

Now for some charts:

Here is the full release.

Some revenue highlights:

  • Revenue for the fourth quarter of 2013 totaled $US243 million, an increase of 116% compared to $US112 million in the same period last year.
  • Advertising revenue totaled $US220 million, an increase of 121% year-over-year.
  • Mobile advertising revenue was more than 75% of total advertising revenue.

Here’s the guidance:

  • Q1 Revenue is projected to be in the range of $US230 million to $US240 million.
  • Full year 2014: Revenue is projected to be in the range of $US1,150 million to $US1,200 million.

The call should be a wild ride: Analysts were all over the place with their estimates prior the call, according to Barron’s:

In the absence of a clear view on Twitter — difficult when the 27 analysts who follow it are sharply divided on earnings — it is probably best to treat Twitter like a spring-loaded mystery. Estimates range from earnings of four cents a share to a loss of 13 cents. The consensus estimate is a loss of two cents.

The risk to the mystery view is that Twitter, like Facebook, is a cult-theme stock. People own Twitter and Facebook (FB) because of what they will be tomorrow and earnings are incidental to the theme. Remember Google (GOOG), which went public a decade ago at $US85? The same valuation debates engulfed Google that now envelop social-media stocks. Google recently traded around $US1,165.

This was the background before the numbers were released:

The main metric to watch for will be monthly active users. In Q3 2013, Twitter reported it had 232 million users. Bullish investors will want to see that number growing robustly. If it does not, that may suggest that Twitter is more of a niche social product than a mass medium like Facebook, the company to which it is frequently compared.

Even so, Twitter has made progress with advertisers over the last year. The question is, can the company produce the kind of explosive sales growth seen at Facebook and Google after their IPOs?

Analysts on average expect revenue to be $US217.82 million. That would be nearly 100% growth in revenue: in the year-prior period it was just $US112.3 million. Sequentially, in Q3 2013, it reported $US168.6 million.

There are, of course, some sceptics. The stock is currently trading around $US66 but one analyst believes it is only worth $US26 because dilution from executives and inside investors who hold options has yet to hit.

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