FinanceDraft

Weaker Revenue Forecast Sinks Twitter Shares

Twitter Inc, shared its revenue forecast for the first quarter and said that its revenue would be weaker than expected and also that the operating costs for this year will rise. That news sent the shares crashing down by 7% in premarket trading and by 10% in midday trading on Thursday. The weak revenue forecast eclipsed the strong fourth quarter results which saw the company’s revenue jump by 24%. The fourth quarter revenue increases to $909 million and beat the estimate of $868.2 million predicted by analysts. The advertising revenue increased to $791 million in the fourth quarter, and more than half of the revenue got generated due to its video advertisements.

Other non-advertising and data licensing revenue rose to $117 million and increased by 35%. Even Twitter shares beat the estimates of analysts by 25 cents and earned a profit of 31 cents for every share. The average number of active daily users who help generate revenue increased to 126 million in the fourth quarter compared to 124 million in the third quarter.

For the first quarter of this year, 2019 Twitter said that it expects the earnings to be in the range of $715 million to $775 million. IEBS data from Refinitiv said that the company missed the midpoint range estimated by the analysts.

As per the data released by Twitter, the operating costs are expected to increase by 20% in 2019 as the company plans to spend money developing the platform and that increases the spending which exceeds the estimates of analysts by 12%. The capital expenditure which the analyst estimated it to be around $415 million will exceed and is likely to be in the range of $550 million to $600 million this year as per the forecast.

Twitter also disclosed that it would not be releasing the monthly active users’ number starting from this quarter. This is a statistic which most companies reported, and instead of that, the company said that it would release the number of people who saw the ads after logging in. CFO of the company said that ‘we want to align our external shareholders around one metric that reflects our goal of delivering value to people on Twitter every day and monetizing that usage.’

Analysts say that the increase in spending has become common in tech companies which includes Google and Facebook as they plan to clean their platforms and improve their health. However, the investors are worried that due to the higher operating costs, the profits will shrink in 2019.

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