Stunted User Growth Wrecks Twitter Earnings Results

The company has guidance for the fourth quarter of $440 million to $450 million in revenue. The consensus estimate for revenue in the fourth quarter is $448.18 million. For the 2014 full year, Twitter expects revenues of $1.36 billion to $1.37 billion, against a consensus estimate of $1.36 billion.

Net income for the third quarter was $6.97 million, compared to a net loss in the third quarter of the previous year of $17.2 million.

Average monthly active users (MAUs) totaled 284 million for the third quarter, which was an increase of 23% year over year. The average mobile MAUs represented about 80% of all MAUs.

Sequential growth in monthly users slowed from 6.3% in the second quarter to 4.8% in the third quarter. The 284 million MAUs was toward the low end of the analysts’ estimate of 280 million to 288 million.

Timeline views reached 181 billion for the third quarter, recording an increase of 14% year over year. Advertising revenue per thousand timeline views reached $1.77, which was an increase of 83% from last year.

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Revenues were distributed over these segments:

• Advertising revenue totaled at $320 million and mobile advertising revenue made up 85% of it.
• Data licensing and other revenue totaled $41 million, an increase of 171% from the previous year.
• International revenue totaled at $121 million, 34% of total revenue and an increase of 176% from the previous year.

Brand Keys ranked Twitter in the top 20 brand loyalty leaders. This list spanned 65 product categories and 721 brands. The list noted that out of the top 20 stocks, only one was not a tech company.

Dick Costolo, CEO of Twitter, said:

We had another very strong financial quarter. I’m confident in our ability to build the largest daily audience in the world, over time, by strengthening the core, reducing barriers to consumption and building new apps and services.

Citigroup initiated coverage on Twitter with a Neutral rating and a $53 price target on October 21. Twitter was raised to Overweight from Neutral and the price target was set at $64 (versus a $50.06 closing price) at J.P. Morgan on October 2. The call was based on a belief that Twitter will continue to add new users and that it will be able monetize the shift toward mobile advertising.

Shares of Twitter closed Monday down 2.7% at $48.56. Following the earnings report, the initial reaction in the after-hours market was negative and shares were down over 9% at $44.12.

The stock has a consensus analyst price target of $54.82 and a post-IPO trading range of $29.51 to $74.73. Twitter has a market cap of around $29 billion.

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