Twitter Inc. (NYSE: TWTR) reported 2020 first-quarter results before markets opened Thursday. The social media company posted adjusted diluted earnings per share (EPS) of $0.11 on revenues of $807.6 million. In the first quarter of 2019, the company reported EPS of $0.37 on revenues of $786.9 million. The consensus estimates for the quarter called for EPS of $0.10 and $776.0 million in revenue.
Revenue growth was 3% year over year, but costs rose by 13%, resulting in an operating loss of $7 million and a negative 1% operating margin. In the same period of last year, Twitter reported operating income of $94 million and a margin of 12%.
On a GAAP basis, the company posted a net loss of $8 million and a loss per share of $0.01. Last year’s EPS included a $124 million tax benefit.
CEO Jack Dorsey commented:
In this difficult time, Twitter’s purpose is proving more vital than ever. We are helping the world stay informed, and providing a unique way for people to come together to help or simply entertain and remind one another of our connections. We’ve delivered our strongest ever year over year mDAU [monetizable daily active users] growth.
What investors were most likely to get excited about was this additional comment from Dorsey:
We are shifting resources and priorities to increase focus on our revenue products and reduce expense growth, ensuring our resources are allocated against our most important work. Revenue product has been elevated to our top company priority, as the current environment validates and creates even more urgency around delivering more direct response ad formats.
Twitter’s now going to focus on making a profit.
Average mDAU totaled 166 million for the first quarter, compared to 134 million in the same period of the previous year and compared to 152 million in the previous quarter. Advertising revenue totaled $683 million in the quarter, of which $301 million came from the company’s international business.
The company did not provide revenue or operating income guidance for the second quarter, nor is it altering its previously withdrawn guidance. The company noted, however, that its capital spending for a new data center may be higher than expected due to near-term capacity needs. The company’s stock-based compensation expense is expected to increase by at least 25% sequentially in the second quarter. In the first quarter, this item totaled $97.9 million.
While Twitter is not offering guidance, analysts estimate that second-quarter earnings per share of $0.05 on revenues of $698.0 million. For the fiscal year, analysts are looking for EPS of $0.48 and revenues of $3.25 billion.
Based on first-quarter results and CEO Dorsey’s comments, the consensus estimates may be too low. If the company is able to cut its expenses and continue to post user growth, then Twitter should have a better than expected year.
In Thursday’s premarket session, shares traded up about 7.6% at $33.41 in a 52-week range of $20.00 to $45.86. The stock’s consensus 12-month price target is $29.52.
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