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Social media company Twitter reported better than expected first quarter earnings Tuesday beating on revenue and earnings sending the stock up 17% in a short market. Performance was boosted from marked rise in ad engagements and fall in cost per engagement.

Social Media

Twitter Inc. (NASDAQ: $TWTR) Reported Earnings Before Open Tuesday

$0.21 Beat $0.14 EPS Forecast and $758 million Beat $702 million Revenue Forecast

Earnings

Twitter reported first-quarter earnings per share of 37 cents, adjusted compared with analyst estimates of 15 cents. Twitter’s $787 million beats estimates of $776.1 million expected in the Refinitiv survey Monthly active users (MAUs), excluding SMS users were 330 million vs. 318 million expected in a FactSet consensus estimate.

The company reports a new metric, monetizable daily active users (mDAUs) for the second time, after announcing last quarter it would shift to this metric and discontinue reporting monthly active users (MAUs). This metric includes “Twitter users who log in and access Twitter on any given day through Twitter.com or our Twitter applications that are able to show ads,” according to the company.

Twitter Inc NYSE: $TWTR

Market Reaction (Lunch) $40.35 USD +5.98 (+17.40%)

TWTR Earnings Q1 19

Highlights

  • Twitter reported 134 million average mDAUs for the first quarter, compared with 120 million a year earlier.
  • In Q4 Twitter said it had 126 million mDAUs.
  • In the U.S., Twitter reported 28 million average mDAUs forthe first quarter, compared with 26 million a year earlier. I
  • TWTR reported 105 million average international mDAUs for the first quarter, compared with 94 million a year earlier.
  • At $787 million, revenues were higher by 18% from the first quarter of 2018.
  • Double-digit increase in ad revenue, also exceeded the market’s expectation
  • The number of monthly active users (MAU) was 330 million in the first quarter, compared to 336 million in the prior-year quarter. 

Outlook

Twitter forecast second-quarter revenue of $770 million to $830 million, compared with analyst estimates of $783.9 million to $853.6 million in the Refinitiv survey. The company reiterated its announcement from last quarter that it expects cash operating expenses to increase about 20% year over year in 2019 as it continues to invest in “health, conversation, revenue product and sales, and platform.”

CEO Jack Dorsey told Rolling Stone in an interview published in January that his team has considered “what happens if we remove the ‘like’ counts from tweets.” Twitter rolled out a public beta test through a separate app last month where it has tested new features, including hiding some replies by default to unclutter conversations and hiding engagement options until a user taps on a tweet, TechCrunch reported.

On the conference call with analysts following the report, CEO Dorsey said the prototype “twttr” app results so far have been promising, but he did not provide a concrete timeline for the broader release of new features. “Generally, most of the people that have been testing the prototype app prefer it over the main Twitter production app,” Dorsey said. “So it’s shown that we’re heading in the right direction, but we still have some work to do before we feel confident that we should put it in production.”

Twitter on Abuse and Regulation

Dorsey said the company is “taking a more proactive approach” to abuse on its platform. “We are reducing the burden on victims and, where possible, taking action before abuse is reported, Twitter now removes 2.5 times more tweets sharing personal information, and about 38% of abuse tweets taken down each week are detected by machine learning models, he said.

On the analyst call, Dorsey addressed a question about regulation, saying Twitter is “completely open to regulation where it makes sense.” “Regulations like GDPR have been a net positive, and not just for our service but for our broader industry in general,” Dorsey said. “It’s added a lot more clarity around privacy and how data is being used to the people that we serve.”

What To Look in Twitter Inc. Earnings

What Analysts Will Be Watching

Twitter's traffic acquisition costs

Traffic acquistion costs (TAC) have been rising, even more so after the Facebook scandal and $FB CEO hauled before congress last year. Alphabet management's response on growing regulatory risk and data privacy issues will be closely analysed also.

Revenue Growth

Twitter's year-over-year revenue growth rate.

Daily Active User Growth

Twitter's daily active user growth. Twitter has seens consecutive quarters of double-digit year-over-year growth in daily active users, some call it the 'Trump affect'. However this key metric has decelerated for the last three quarters. 

The shift to a new metric came after Twitter reported MAUs that fell short of analyst estimates for two straight quarters during its fiscal year 2018. Twitter previously blamed the shortfall in part on a July 2018 purge of “locked” accounts that was meant to get rid of bots and fake users, among other factors. Twitter said the 330 million average MAUs it reported for the first quarter was a decrease of 6 million year over year

Source: TradersCommunity, Alpha Street

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