Twitter Inc. soared the most since its market debut, it is up for more than 21% in trading Wednesday morning, after the social-media company reported better-than-expected fourth-quarter results including its first quarterly profit, which is also driven by improvements to its app and added video content that are persuading advertisers to boost spending on the social network.
Twitter reported revenue of $731.6 million — 6.6% above the $686.4 million that Wall Street had expected. The company earned an adjusted $0.12 a share, missing the $0.14 that Wall Street was anticipating. Net income was $91.1 million, or 12 cents a share, marking the first time the company reached profitability under generally accepted accounting principles. That compared with a loss of $167.1 million, or 23 cents, a year earlier. Profit excluding some costs was 19 cents a share, exceeding projections for 14 cents.
While quarterly revenue rose just 2% year-over-year, Twitter managed to cut costs by 28%, resulting in the company’s first profitable quarter — a goal CEO Jack Dorsey laid out on an earnings call last February.
The shares soared as much as 30 percent, the most since Nov. 7, 2013, to $35. They were trading at $31.14 at 12:59 p.m. in New York, bringing gains over the past 12 months to about 66 percent.
“Q4 was a strong finish to the year,” Dorsey said in a press release. “We returned to revenue growth, achieved our goal of GAAP profitability, increased our shipping cadence, and reached five consecutive quarters of double digit daily active user growth. I’m proud of the steady progress we made in 2017, and confident in our path ahead.”
Twitter has struggled to raise its stock price above 2015 levels in the face of claims it didn’t take adequate steps to combat harassment on the platform and stagnant active user counts. It ended 2017 with 300 million monthly active users, the same as the previous quarter, but posted a 12% uptick in daily active users compared to the previous year.
This was the company’s first report following the rollout of 280-character tweets to every user Twitter user, a move it hoped would increase engagement and time spent on the platform.
Wall Street now has an average target price of $21.77 for the stock — 45% below the stock’s opening price of $34.45 Thursday.
Chief Executive Officer Jack Dorsey said, Twitter will be doing more experimentation to make its timeline more “personalized and relevant” to people. He also emphasized a focus on matching people with their interests as fast as possible. There will be “a much more cohesive strategy” around events, like seeing sports scores during live games. New product tweaks, like Twitter’s decision to increase the character limit to 280, have increased engagement and minimized confusion.
The company gave a first-quarter outlook for adjusted earnings before interest, taxes, depreciation and amortization of $185 million to $205 million. Analysts estimated $188.3 million.
Twitter may stand to benefit from Facebook’s recent decision to shift its news feed toward content from family and friends and to focus less on posts from media outlets and businesses. The change is encouraging publishers and online advertisers to increase investment on Twitter, according to some analysts. Still, that may not be enough to move the needle for Twitter’s overall share of worldwide digital ad spending, which is expected to shrink slightly to 0.8 percent this year, according to researcher EMarketer. That compares with Facebook’s 18.4 percent and Google’s 31.3 percent.
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