Twitter: Going Down?

Twitter (TWRT) announced fourth quarter ended December 31, 2015 total revenue of $710 million, up 48 percent year-over-year from $479 million during the same period last year. Going forward, the company estimates first quarter of 2016 revenue to be in the range of $595 to $610 million.

Twitter declared fourth quarter of 2015 non-GAAP net income of $115 million or $0.16 per diluted share, up 46 percent year-over-year from $79 million or $0.12 per diluted share in fourth quarter of 2014.

The online tweeting global platform reported continued year-over-year growth in both its top and bottom lines primarily driven by the significant expansion in the active users count during the quarter.

The ongoing quarter-over-quarter and year-over-year increase in both the company’s top and bottom lines are mainly due to notable growth in the number of active users.

Positives to consider    

Twitter witnessed an impressive sequential and year-over-year growth in top line categorized by geography particularly driven by significant user traction for the global tweeting platform across the United States and internationally.

The attractive growth in both the company’s consolidated and geographical revenue is primarily driven by extremely well-diversified revenue sources distributed strategically and geographically across the globe.

Twitter reported a continued sequential decline in both its ad engagements and cost per ad engagement which is in line with its continued commitment to minimize non-core expenses somewhat offset by sequential reduction in ad engagements.

Total average number of monthly active users (MAUs) related to twitter grew over 9 percent year-over-year and worldwide to 320 million during the fourth quarter of 2016 and remaining flat compared to third quarter of 2016.
Further, the monthly active user count internationally and for the US grew over 11% and over 3% respectively on year-over-year basis.

The compelling monetization metrics of Twitter is driven by ongoing year-over-year growth in ad engagements coupled with a slight sequential reduction and significant year-over-year decrease in cost per ad engagements.

A sharp decline

Twitter stock price is continuing to witness a sharp decline of approximately 50% since May 2015 and is observed to be having several difficulties sustaining more than $26.00 per share of stock price. The big social-media company is witnessing this significant and continued fall in the stock price mainly due to notably losing user growth momentum since the beginning of the fiscal year 2014.

Regrettably, Twitter is gradually taken to be social media delivery platform leveraged mostly by “old people” which is the prime reason that the company is not able to capture the younger user base and particularly teenagers. Contrastingly, Facebook is continuing to grow its younger user base all across the globe which has allowed Facebook’s stock price to climb manifolds over a smaller period of time.

The plunging stock price of Twitter is particularly driven by the inability of the social-media giant to attract younger users and thus, losing the market share to its key rival Facebook which is increasingly growing its global younger user base through implementing superior innovation and online marketing methodologies driving attractive top line growth.


Overall, the equity investors are advised to “Hold” their position in Twitter, Inc. considering the company’s weaker near-term growth prospects and shaky long-term future as observed from shabby PEG ratio of 0.68 only which is comparable to the industry’s growth average of 0.98. The profit margin of -23.49% signifies no profit but loss. However, Twitter has an attractive total cash position of $3.50 billion against smaller total debt of $1.60 billion only which seems to be encouraging the company to make future growth investments.
Published on May 3, 2016
By Subhen Mittra

Copyrighted 2020. Content published with author's permission.

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