Twitter's Not Out of the Woods Quite Yet!

Twitter has been having a very rough time this year. As the company continued to struggle to bring in new users, investors have started to pull their investments out of the stock, driving the price downward. As a result, the CEO of the company, Dick Costolo, made the decision to resign from the company. From there, investors were hopeful that Jack Dorsey would pick up the company and maintain the position as permanent CEO. In this case, investors got what they wanted. However, as expected, TWTR has reported earnings for the quarter. While earnings and revenue came in above expectations, guidance proved to be a major cause for concern. Today, we’ll talk about what we saw from earnings, why investors are concerned about TWTR, whether or not Jack Dorsey is the right man for the job, and what we can expect to see from the stock moving forward.

Twitter’s Earnings Fail To Excite

The first earnings report under Jack Dorsey proved to be anything but what investors wanted to see. While Twitter did beat expectations with regard to revenue and earnings, they failed to provide positive information with regard to what investors can expect to see in the future. Here’s what we saw from Twitter’s earnings report…

  • Revenue – Twitter proved that even with the low user growth, they are capable of increasing earnings. While analysts expected to see Twitter generate $560 million in revenue, the company actually reported revenue for the quarter at $569.
  • Earnings – The company was also able to beat earnings expectations for the quarter. Although analysts expected to see earnings in the amount of $0.05 per share, TWTR actually reported earnings of $0.10; double what anyone expected to see.

Looking at revenue and earnings, it seems as though TWTR generated an incredible earnings report. However, earnings and revenue don’t always tell the whole story, and in this particular case, they definitely don’t. While revenue and earnings were overwhelmingly positive, investors really didn’t care about revenue and earnings in this particular case. What investors cared about was the progress with regard to Twitter’s biggest problem, users. Unfortunately for Twitter, the company wasn’t able to produce positive results with regard to earnings. In the quarter, Twitter users grew by 3 million. While that sounds like quite a bit, in the grand scheme of things, this is incredibly sluggish growth in the world of mainstream social media.

On top of the poor user growth, guidance also proved to be an issue for investors. Twitter announced that for the fourth quarter, they are expecting revenue to come in between $695 million and $710 million; far lower than the $741.8 million analysts were expecting to see.

Is Dorsey The Right Man For The Job?

The poor user growth and poor guidance from TWTR underscore the idea that Dorsey isn’t the right man for the CEO position at the company. I’ve covered this story for quite some time and I have a couple big issues with Dorsey as CEO. First and foremost, Jack Dorsey held the position as Twitter’s CEO in the past. However, he was terminated from the position because his focus simply wasn’t there. Beyond his previous performance, it’s also important to remember that Dorsey is the CEO of Square… a company that is going public soon as well. Between working on Square and living a life, Dorsey simply doesn’t have the time for TWTR.

What We Can Expect From Twitter Moving Forward

Moving forward, I’m not expecting to see very much positive news out of Twitter. The reality is that until Twitter can get its new users issue under control, investors aren’t going to have very many resons to invest in the company.

What Do You Think?

Where do you think TWTR is headed and why? Let us know in the comments below!

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