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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 Friday

$0.20 Beat $0.19 EPS Forecast and $841 million Beat $829.1 million Revenue Forecast

Earnings

Twitter reported second-quarter earnings per share of 20 cents, adjusted, vs. 19 cents per share expected, per Refinitiv survey of analysts on revenue of $841 million, vs. $829.1 million expected, per Refinitiv

On a GAAP basis, net income was $1.1 billion, or $1.43 per share, compared to $100 million, or $0.13 per share, in the year-ago quarter. The results include a significant income tax benefit related to the establishment of a deferred tax asset. Adjusted net income totaled $37 million, or $0.05 per share, below the forecasts for $0.19 per share.

The company reports a new metric, monetizable daily active users (mDAUs) for the third 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 Pre-market $40.27 +2.15 (+5.64%)

Highlights

  • Revenue in the US increased 24% to $455 million
  • Iinternational revenue increased 12% to $386 million.
  • Japan remains Twitter’s second largest market, growing 9% year-over-year, and contributing 16% of total revenue
  •  Average monetizable daily active users (mDAUs): 139 million
  • Revenue was up 18% year over year, the company 
  • Twitter said it reached an average of 139 million monetizable daily active users (mDAUs) in the second quarter, a 14% increase year over year.
  • Average domestic mDAUs came to 29 million in the quarter, a 10% increase compared with a year earlier.
  • Internationally, average mDAUs were 110 million in the quarter, up 15% from the previous year.
  • Twitter said its total advertising revenue reached $727 million in the quarter, up 21%, or 23% on a constant currency basis.
  • Its ad revenue growth in the U.S. grew 29% compared with 26% the previous quarter
  • “We feel like our messages of launching new products and services and connecting what’s happening continues to really resonate with advertisers,” Segal told analysts on the earnings call.

Twitter Q2 2019 Earnings

On a call with analysts, CFO Ned Segal said Twitter has been “remarkably consistent” with bringing in users at the top of the funnel who visit the site for a specific purpose. It’s focused on converting those people into mDAUs by helping them “find what they’re looking for faster,” he said.

Outlook

guidance for the third quarter, saying it expects revenue to range from $815 million to $875 million. It expects operating income to range between $45 million and $80 million. For the full fiscal year, Twitter reiterated that it expects operating expenses to go up about 20% on a year-over-year basis as it invests in top priorities like health and conversation.

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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