How Did Twitter Perform In Q4?

by Trefis Team
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Twitter (NYSE:TWTR) announced its fourth quarter and full-year 2018 results on Thursday, February 7, reporting a 24% increase in net revenues to $909 million. Revenue growth was slightly ahead of market expectations as well as our expectations. The company’s adjusted EBITDA margin expanded by about 2 percentage points over Q4’17 to 44% for the quarter (and increased around 4% to 39% for the full year). The overall GAAP net income and EPS beat consensus at $255 million and $0.33, respectively.

Following the earnings release, Twitter’s stock traded down by over 5% despite the earnings beat. The company’s total monthly active users (MAUs) declined both year-on-year and sequentially to 321 million. Management also disclosed that it will stop reporting monthly active users going forward, and will instead begin reporting “monetizable daily active users.” Its reported mDAUs stood at 126 million in Q4, up by around 9% year-on-year.

Why Did The Stock Trade Down?

As mentioned above, Twitter’s stock traded down following its earnings release. This was primarily due to the decline in MAUs, the change in reporting structure and relatively soft guidance. For Q1 2019, Twitter expects total revenue of $715 million – $775 million, and GAAP operating income of $5 million – $35 million. The company’s focus on user base cleanup (removing bot accounts and abusive users) may have a further impact on its overall user base, though that impact should be less noticeable on the new mDAU metric.

Going forward, we expect Twitter’s user base to see modest growth over the next few years despite some of the aforementioned factors. Its international growth should remain solid, and we expect its overall ARPU figure to see a boost from an improved (and cleaned up) user base as well as overall platform improvement.

Our interactive dashboard on Twitter’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation. It should be noted that we are in the process of updating our model for the new reporting structure, which is not yet reflected in the dashboard.

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