Twitter Stock Set to Turn Around
Twitter Inc (NYSE:TWTR) stock has had quite a volatile month on the back of buyout rumors. However, the company’s third-quarter results should buoy TWTR stock as the company tries to turn around through cost-cutting measures.
Twitter announced its third-quarter earnings this morning. The social media company has exceeded the consensus estimates on revenue and earnings. The company’s third-quarter revenue was $616.0 million, up eight percent year-over-year, and its adjusted earnings were $0.13 per share. Total advertising revenue grew six percent to $545.0 million, out of which 90% came from mobile advertising revenue.
Twitter also confirmed the news that it was going to lay off a substantial percentage of its workforce. The company said today that it would cut nine percent of its global workforce to keep costs down. Chief Financial Officer Anthony Noto said that Twitter has set a company goal of driving toward generally accepted accounting principles (GAAP) profitability in 2017. (Source: “Q3 2016 Letter to Shareholders,” Twitter Inc, October 27, 2016.)
Such cost-cutting measures have become indispensable, as the company deals with slow growth in its user base. The restructuring shall allow the company to eliminate its investments in non-core areas and reorganize its sales, partnerships and marketing efforts.
Twitter’s average monthly active users (MAUs) were 317 million, up three percent year-over-year. The company is trying to make the service more convenient, as well as safe, for users. Twitter plans to roll out important safety features and update its safety policies. An enhanced Twitter experience is likely to attract more users to the platform, which would be good news for TWTR stock.
The company has also signed a dozen live streaming video partnerships since June this year, and the results have been impressive. The high viewership for National Football League (NFL) Thursday Night Football games had boosted Twitter stock earlier. Over the coming quarters, the company is optimistic about its “Twitter Amplifier” program, which now supports pre-roll video, to attract more ad revenues.
Twitter reported that its total ad engagements grew 91% year-over-year, and that the company continues to work on optimizing the efficiency of its ad platform.
The media has been reporting on renewed buying interest from Walt Disney Co (NYSE:DIS). Nothing has been confirmed, but the possibility cannot be ruled out as the changing media landscape forces industry players to look for ways to grow. The latest AT&T Inc. (NYSE:T) and Time Warner Inc (NYSE:TWX) deal is an example of this development. On good valuation and rising growth, TWTR stock may again attract more buying interest.
The company did not provide revenue guidance for the next quarter. However, the direction for Twitter as an independent media company with a focus on real-time content and video has been set. If executed well, the path shall lead to improved results for Twitter and more upside for TWTR stock.
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