Twitter Stock Fell, But The Company Is Making Smart Changes

Twitter Earnings Specifics

Twitter’s earnings report caused its stock to fall from $34.16 to $29.95 in 2 days which is a combined loss of 12.3%. It’s an interesting reaction because the firm beat earnings and revenue estimates. 

EPS was 31 cents which beat estimates for 25 cents. GAAP operating income was $207 million which was up 88% year over year. Operating margins were 23% which was up from 15% last year and 12% last quarter. GAAP net income was $255 million which was up 180% year over year. 

This quarter had a $120 million boost from realized deferred tax assets. Revenue was $909 million which beat estimates for $868.1 million. Revenues were up 24% year over year. Data licensing was up 35% and advertising was up 23%. 44% of business is international.

For years the company couldn’t make a profit. Finally, it cut costs turning a profit even while it has had sluggish user growth and has had to fend off abuse on its platform. 

We’ve seen Facebook’s headcount explode and its margins fall because it needs to manage its community better. I think it’s an amazing feat that Twitter has become consistently profitable during this period. 

The fact that it is profitable limits the downside in the stock. There’s a very slim chance that it will revisit the share price in the mid-teens that it had in 2017.

Twitter - Amazingly Positive Changes

I think it’s completely wrong that the stock is down because the firm is finally taking steps in the right direction to prioritize engagement. 

For years Twitter tried to catch up to Facebook’s user total by allowing abuse on the platform and counting monthly active users instead of daily active users. When the company decided to make profitability a goal, it realized engagement was more important than boosting monthly user totals. 

It’s weird to say this, but the firm seems to have finally started caring about its users.

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