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No Earnings Tweet for #Twitter

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Twitter shares fell about 23 percent in after-hours trading after the company announced quarterly earnings results and forward guidance that disappointed investors.

Despite drop-offs in the growth of some numbers, including new users, Twitter executives described a platform as still evolving, and that further development of the mobile experience was a focus of growth in 2104.

Twitter CEO Dick Costolo defended the growth of Twitter, pointing to the fact that some user interaction metrics such as private messaging are growing, and important revenue metrics such as average revenue per timeline were showing improvement. He said the company will be making additional investments in the Twitter platform, specifically in the mobile experience.

So how is the company going to turn things around?

No Room for Error

“We are doubling down in 2014 to accelerate the growth of our user base,” said Costolo. “We don’t need to change the characteristics of our platform. We just need to make Twitter a better Twitter.”

Fourth-quarter revenue was $243 million, up 116 percent year-over year. The company announced a net loss of $511 million on the quarter, but the non-GAAP net loss, which stripped out special charges related to stock compensation, was only $9 million.

Investors may have been concerned about the fact that several metrics showed that user growth is slowing. Monthly Average Users (MAUs) were 241 million, up 30 percent year-over year. But total users grew only 3 percent in the fourth quarter. On metric of usage, total timeline views, actually fell from the third quarter, dropping from 159 million to 148 million.

Given Twitter’s enormous market capitalization and valuation — before last night’s earnings call it was trading at a market cap of $30 billion, with a multiple of nearly 30 times sales — the company will likely have to start blowing numbers out of the water to result in sustained share gains. Twitter shares are up about 50 percent since it started trading after its IPO in November.

Some observers, including Financial Advisor Josh Brown and CNET Editor Roger Cheng, pointed out that Twitter has enjoyed such massive growth in its IPO and the month just after, that it might be time for shares to settle out a bit.

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Mobile Focus Going Forward

Costolo said Twitter needs to make  improvements on the mobile platform, referring to the mobile experience several times during last night’s conference call. He said integrating rich-media content into Twitter is also important.

“Integration of rich media experiences makes Twitter more accessible,” said Costolo. “We’ll make Twitter more engaging across multiple dimensions.”

There were some bright spots — private direct messaging increased 25 percent. And revenue per timeline view in the United States grew from $2.58 in the third quarter to $3.80 in the fourth quarter.

Financial analysts on the conference call grilled Twitter about growth rates and the important MAU metrics for revenue.

“Are you disappointed with the MAU growth?” asked one analyst. For the most part, executives danced around the questions, coming back to investments that will be made to spur growth in 2014.

Twitter executives took some questions from Twitter itself, but they were only posed by Wall St. analysts, not Main St. investors.

For the current quarter, Twitter projects revenue that will be in the range of $230 million to $240 million. Adjusted EBITDA is projected to be in the range of $10 million to $16 million. For the full year, Revenue is projected to be in the range of $1.1 billion to 1.2 billion and adjusted EBITDA is projected to be in the range of $150 million to $180 million.

Title image by AnjelikaGr (Shutterstock).

About the Author

R. Scott Raynovich is an independent author, technology analyst and media consultant. He publishes a blog, The Rayno Report.

 
 
 
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