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Social media company Twitter reports second quarter earnings Friday beating on revenue but in a Facebook type move $TWTR collapsed 18% after as monthly active users declined. Concern is about rising traffic aquisition costs and user retention.

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Twitter Inc. (NASDAQ: $TWTR) Earnings Beat on Revenue Before Open Friday

$0.17 matching $0.17 EPS $711 million beating $696.23 million forecast in revenue 

Earnings

$TWTR reported a net income of $100 million or $0.13 per share for the quarter compared to a net loss of $116 million or $0.16 per share last year. Adjusted net income was $134 million or $0.17 per share. Total revenue of $711 million in Q2, up 24% year-over-year, and  a net margin of 14%.

Twitter Inc NYSE: $TWTR

Market Reaction > 36.00 −6.94 (-16.16%)

Highlights

  • Average monthly active users (MAUs) came in at 335 million for Q2 2018, up from 326 million in Q2 2017, but down slightly from 336 million in Q1 2018.
  • Average daily active users (DAU) rose 11% year-over-year.
  • Average U.S. MAUs were 68 million for Q2, flat with the year-earlier period and down from 69 million in Q1.
  • Average international MAUs were 267 million for Q2, versus 258 million in the same period of the previous year and 267 million in Q1.
  • Advertising revenue grew 23% year-over-year to $601 million
  • Total ad engagements saw a year-over-year growth of 81%.

TWTR Earnings Q2 18

Outlook

“Based on our current level of visibility, we expect the decline to be mid-single-digit millions of [monthly active users],”

  • For the third quarter, Twitter expects adjusted EBITDA to be $215 million to $235 million and adjusted EBITDA margin to be 33% to 34%. For the full year of 2018, the company expects capital expenditures to be $450 million to $500 million.

 

Twitter Inc. (NASDAQ: $TWTR) Reports Before Open Friday

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  Alphabet management's response in the conference call on growing regulatory risk and data privacy issues will be closely analysed. 

Revenue Growth

Twitter's first-quarter year-over-year revenue growth rate accelerated to 21%m from a lowly 2% growth in Q4. This saw Twitter swung from a net loss of $62 million in the first quarter of 2017 to a profit of $61 million in the first quarter of 2018. No mean feat in a year where many saw the end of twitter First-quarter EPS and non-GAAP EPS of $0.08 and $0.16, respectively.

Daily Active User Growth

Twitter investors will be revited to $TWTR's daily active user growth. Twitter has seens six 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. Twitter's daily active users increased 10% year over year in Q1, this was down from 14% growth in the third quarter of 2017. 

  • Shares closed Friday at $43.43 with a 52-week range is $15.67 to $47.79

 

 Source: Deutsche Bank, Stiffel, TradersCommunity, Alpha Street

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