Twitter Earnings Preview: Humble Beginnings
Twitter (NYSE: TWTR), which bought 900 patents from IBM last week, is scheduled to report its fourth-quarter full-year results Wednesday, February 5, after the closing bell.
This will be its first public quarterly earnings report.
Investors will be looking for Twitter to have benefited from the strong spending on its platform last quarter and for the stock's momentum to resume. Specifically, investors want to know how quickly Twitter is adding new users and how much its revenue is growing.
Analysts on average predict that Twitter will report that its revenue for the quarter totaled $217.78 million. A net loss of $0.02 per share is also in the consensus forecast. Note that 60 days ago the consensus estimate called for a net loss of $0.03 per share.
The street high forecasts, from those analysts polled by Thomson/First Call, are a profit of $0.04 on revenue of $238.00 million for the quarter.
The analysts' consensus full-year forecast calls for a net loss of $0.19 per share, as well as revenue of $639.39 million. Some 60 days ago, though, that consensus estimate called for just a $0.18 per share loss.
Looking ahead, earnings and revenue for the current quarter are expected to be nearly the same as in the fourth quarter. However, the full-year 2014 forecast so far calls for a narrower net loss of $0.04 per share and more than $1 billion in revenue.
Twitter operates a global platform for public self-expression and conversation in real time. The company also provides development tools, public application programming interfaces and embeddable widgets that developers can use to contribute their content to its platform. In addition, it has strategic partnerships with Comcast and NBCUniversal.
The company was founded in 2006 and came public in early November of 2013. Its headquarters are in San Francisco. It currently has a market capitalization of more than $35 billion. Richard Costolo has been chief executive officer of the company since October of 2010.
Competitors include Facebook, which is expected to nearly double its earnings per share (EPS) and see a revenue gain of more than 58 percent in the current quarter, as well as LinkedIn, which reports quarterly results Thursday and is forecast to have marginal EPS growth but strong revenue growth, relative to a year ago.
During the three months that ended this past December, Twitter formed the above-mentioned strategic partnership with Comcast and NBCUniversal, chose to be listed on NYSE instead of the Nasdaq (as Facebook's disastrous IPO was), held its highly anticipated initial public offering and launched a native advertising platform for mobile apps.
Twitter's long-term earnings per share growth forecast is in the red, as is its operating margin. The PEG ratio is much greater than the industry average. But it has a return on equity of more than 115 percent. The company so far offers no dividend.
The number of Twitter shares sold short, as of the most recent settlement date, represents about seven percent of the total float. That was the highest level of short interest since the IPO, as the number of shares short has increased in each reporting period since then.
Only six of the 32 analysts surveyed by Thomson/First Call who follow the stock recommend buying Twitter shares, while three rate the stock at Sell. The analysts' mean price target, or where they expect the stock to go, is much less than the current share price.
The share price is more than 43 percent higher than when the stock began trading in November, but it is down more than six percent in the past month. Since the IPO, Twitter has outperformed the competitors mentioned above, as well as Google and the S&P 500.
At the time of this writing, the author had no position in the mentioned equities.
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