Twitter shares rise over 30% as earnings impress

Twitter shares rose over 30% after the market close night and are currently up 26% to $49 in pre-market trading, almost double the $26 IPO price of November 2013. The shares were trading as low as $30 in April 2014.

After suffering ealier this year on a combination of disappointing user growth and the expiration of lock outs which prevented early investors selling shares, the latest quarterly earnings report has taken the market by surprise.

Last night the company reported revenues of $312.2 million in the second quarter, up from $139.3 million in the same period a year ago and well ahead of expectations of $283 million. Revenues were up 124% year on year. It reported a loss of $144.6 million, or 24 cents a share, compared with a loss of $42.2 million, or 32 cents a share for the year-earlier period. On an adjusted basis non GAAP basis, Twitter reported a a profit of 2 cents a share versus expectations of a loss of a cent a share.

81% of revenues were generated by mobile advertising compared with 62% for Facebook and international revenues were $102 million, up 168% year-over-year and 33% of total revenue.

Twitter also reported 271 million monthly active users in the second quarter whic was up 24% year on year plus 6.3% quarter on quarter and better than the expected 267 million users which was a good result particularly after the last quarters disappointment. The increase of 16 million users in the quarter was the best result for 5 quarters.

The company raised its guidance for the full year to revenue of around $1.3 billion and adjusted EBITDA of between $210 million and $230 million or 13 cents a share. The forecast was ahead of expectations of $1.27 billion revenue and adjusted EBIDTA of $207million.

The World Cup seems to have been beneficial to the company but Chief Executive Dick Costolo was down playing this on the analyst conference call last night and highlighted that this quarters growth was driven mainly by changes to the user experience and platform refinements. Costolo seems to believe that the Twitter platform has plenty of growth potential left it in, but the sharp rise in the share price has caught many market commentators by surprise, particularly because monthly users and earnings were not off the scale by any means. It seems the sell off in April was the opportunity to pick up Twitter shares on the cheap and the market’s skepticism on this stock seems to have turned 180 degrees. The social media space is red hot right now!

Contrarian Investor UK

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