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Twitter (TWTR) Q4 Loss Narrower than Expected, Revenues Miss

Twitter, Inc.TWTR shares are down nearly 10% in pre-market trading following its fourth-quarter 2016 earnings report. Twitter's adjusted loss per share of 3 cents was narrower than the Zacks Consensus Estimate of a loss of 11 cents per share. However, revenues of $717.2 million missed the Zacks Consensus Estimate of $737.7 million.

On a year-over-year basis, revenues were up a mere 1%. This is the company's lowest gain since it went public. Revenue growth has been decelerating over the last several quarters.

Moreover, advertising revenues were down in the quarter to $638 million from $641 million reported in the prior-year quarter.

Twitter's user growth wasn't overly impressive, yet again. Monthly average users (MAUs) increased from 317 million to 319 million this quarter, up 0.6% sequentially. Year over year, MAUs increased 4%. Mobile MAUs were 83% of total MAUs. Average DAUs were up11% year over year.

Quarterly Numbers in Details

The company posted non-GAAP earnings per share of 16 cents per share, flat year over year.

Coming to ad metrics, there was a 151% year-over-year surge in ad engagements but cost per ad engagement was down 60%, given the shift to auto play video, which has lower cost per view compared to click to play.

Mobile advertising revenues contributed 89% to total advertising revenue in the quarter. Data licensing and other revenues increased 14% to $79 million.

Twitter earned nearly 38.6% of its revenues from international markets. International revenues rose 12% year over year to $277 million in the reported quarter. U.S. revenues decreased 5% year over year to $440 million.

The company reported 12% increase in adjusted EBITDA to $215 million. Adjusted EBITDA margin was 30%, up from 27% in the year-ago quarter.

Twitter, Inc. Price, Consensus and EPS Surprise

Twitter, Inc. Price, Consensus and EPS Surprise | Twitter, Inc. Quote

Twitter reported an operating loss of $143.6 million, which compared unfavourably with a loss of $67.2 million reported in the year-ago quarter.

Balance Sheet & Cash Flow

At the end of Dec 31, 2016, cash and cash equivalents (short-term investments) were $3.77 billion compared with $3.49 billion at the end of Dec 31, 2015. For the year, cash flow from operations was $763.1 million and adjusted free cash flow was $444.1 million.

Outlook

For 2017, stock-based compensation is expected to decrease in a range of 15% to 20% year over year while capex will be in a band of $300 and $400 million. Expenses are expected to be unchanged to decrease 5% year over year.

For the current quarter, adjusted EBITDA is expected to be in a range of $75 million to $95 million while EBITDA margin is expected to be in a band of 17% to 17.5%.

Our Take

Twitter has been a social phenomenon but somehow hasn't been able to leverage that success to boost user growth.

At 319 million users, Twitter falls way behind other social media services like Facebook Inc. FB , which has over 1.8 billion users. Even Facebook's subsidiary, Instagram has over 600 million users. The complex nature of the service has been often considered as a major hindrance to user growth.

Though the company has been working hard to bring about a turnaround, its efforts are yet to yield the desired results. Focus on Live video content, a flurry of live streaming deals, user friendly changes, measures to curb the trolling menace, and divestment of non-core operations, and layoffs, the company has been doing it all. But all these are yet to move the needle for Twitter.

Twitter's standalone status has already been questioned last year with Alphabet GOOGL and The Walt Disney DIS speculated to have shown interest in buying the company. Given the dismal results, the buyout rumors might resurface.

At present, Twitter carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

In the past one year, shares of Twitter are up 12.28% as against a 31.07% rise in the Zacks Internet Software industry.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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