Financial Trading Blog
Stock of the day 08/02/2016 – Twitter Inc
For the last 3 quarters Twitter has really suffered in the aftermath of its earnings releases; its Q1 2015 results at the end of April caused the stock to plunge 27.5% in 2 days, whilst its Q2 figures at the end of July inspired a 30% fall in across the following week.
Reaction to its third quarter announcement at the end of last October was slightly more mixed; initially the stock dropped 12%, only to recoup 13% the following day. However, that rebound was to be brief, and soon Twitter was falling with alarming consistency, reaching an all-time low of $15.50 during the third week of January. The stock sits at a current trading price of $15.71 (IT-Finance.com, 08/02/2016).
(Source: IT-Finance.com 08/02/2016)
So what was in that Q3 report, the first under CEO Jack Dorey, to spark the company’s latest decline? Well, despite better than forecast revenue of $569 million (a 58% increase year-on-year) the arguably more important monthly active users metric came in lower than expected at 320 million, a mere 4 million improvement year-on-year (compared to the 49 million increase seen by Facebook for the same period). Perhaps even more damningly Twitter announced its fourth quarter revenue guidance was between $695 million and $710 million, far lower than the $739.7 million anticipated by analysts.
What, then, is on the cards for Wednesday’s Q4 results? In terms of the headline figures, Twitter is expected to see a 48% increase in revenue to $710 million, aided by a 45% rise in ad revenue. Whether or not Twitter’s new-ish ‘Moments’ feature has had any impact on the company’s stagnating user growth is unclear, though its 1% increase in Q3 monthly active users sets a very low bar for the company to clear. Investors will also likely be looking for clarification (beyond a Dorsey tweet) on the company’s rumoured renovation of the site’s ‘timeline’ feature (which would see people’s tweets reordered based on an algorithm), news that caused a 5.7% fall last Friday.
Twitter Inc has a consensus rating of ‘Hold’ with an average target price of $31.69.
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