Twitter User Numbers Expected Stagnant In Q4, Will Ad Revenue Grow?
Twitter ( TWTR ) stock continued to free fall on Friday. It again tumbled close to a record low after getting a price target cut from Wedbush, which predicts that the social media company won’t show meaningful user growth when it reports Q4 earnings next week because the service remains harder for the average user to figure out than its peers in the social space. “We believe positive ad pricing trends drove Q4 revenue towards the high end of guidance, but user growth likely was stagnant,” wrote Wedbush analyst Michael Pachter in an industry note on Friday. Monthly active users of the service (excluding SMS Fast Followers, who can get tweets on their phones without being registered users) rose by just 5 million to 307 million from Q1 to Q3, he said. Wedbush cut its price target on Twitter stock to 20 from 30. Wedbush maintains a neutral rating on Twitter stock. Social media leader Facebook ( FB ) last week reported that mobile strength boosted its average price per ad by 21% year over year in Q4. Judging by that, Twitter likely also saw an ad pricing uptick with “increased engagement, up 165% year over year in Q3,” Pachter said. The rise likely offset lower cost per engagement to the consumer (down 39%) due to the shift to auto-play from click-to-play video ads, he said. But some new efforts aren’t working. “We do not think that Moments drove a meaningful increase in users, as much of the content remains outdated or irrelevant,” said Pachter, referring to Twitter’s Moments service, launched last fall, which showcases the hottest news stories. Also, he said, “Twitter remains difficult to use relative to its peers, and a solution does not appear to be imminent.” Twitter stock was down more nearly 6% in early-afternoon trading in the stock market today , near 16 and not far above its record low of 15.48 brushed in late January. Twitter is down 78% from its all-time high of 74.73, touched in late December 2013. It’s been below its IPO price of 26 since mid-November. With its stock so low, buyout talk has emerged, with rumored acquirers including Alphabet ( GOOGL )-owned search giant Google, along with traditional media companies Comcast ( CMCSA ), Walt Disney ( DIS ) and News Corp. ( NWS ). News Corp. discounted the rumors, according to Reuters . Twitter’s efforts to expand its user base aren’t gaining traction. It has launched programs to reel in “logged out” users who visit Twitter’s site but don’t have accounts of their own, making them less coveted by advertisers. Twitter posted Q3 earnings and revenue that beat Wall Street views, but its user growth slowed and its Q4 sales guidance missed analyst estimates. For Q4, Twitter guided revenue of $695 million to $710 million, up 46% at the midpoint but below the $739.7 million that analysts polled by Thomson Reuters had originally modeled; they now expect $709.94 million. Analysts polled by Thomson Reuters originally expected Q4 EPS ex items of 14 cents, up 17%. But they have revised their EPS ex items estimate to 12 cents. Twitter reports earnings on Feb. 10 after the stock market close.
