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Matching Last Year’s Performance: Will Twitter (NYSE:TWTR) be Able to Catch Up?

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On Monday the 27th, the San Francisco CA based social networking company is set to release its performance reports for the third quarter of the 2014 fiscal year. Below are the key areas that investors need to take into consideration before analyzing its performance.

Wall street’s expectations:

The expectations of certain analysts far exceed the criteria that Twitter Inc (NYSE:TWTR) has set for itself. The service is expected to generate $351 million in revenue along with an EBITDA of $52.6 million. Similarly, adjusted earnings per share (EPS) are expected to reach $0.01. In the last quarter, the company expected its revenue to fall between the $330-340 million range along with an adjusted EBITDA coming under the range of $40-50 million in the third quarter.

The high expectations from Twitter are due to its incredible performance in the last quarter that has far exceeded the analysts’ expectations. Revenue reached the mark of $312 million whereas the analysts predicted it to be around $282 million and that day, Twitter’s stock stood at 22%. Reason behind this incredible performance is mainly attributed to the Fifa World Cup that led to an increased engagement. However, many analysts are assuming that Twitter won’t be able to follow a similar pace after the world cup.

Revenue Segments and Fabric:

90% of the company’s revenue depends on the advertising service segment, which according to analysts is not good news. Due to this reliance, Twitter’s shares are 17% down despite an increase in earnings in the last quarter. The company’s latest software ‘Fabric’ is expected to expand its revenue soon and thanks to this software, Twitter (NYSE:TWTR) will become tough competition for other big names in the social media such as Amazon (NASDAQ:AMZN), Google, Inc. and Facebook Inc (NASDAQ:FB).

Achievements:

In August, the company acquired the password security application Micro labs, which lead to an enhancement in its geo-location services. The company’s previous achievements are also expected to play a key role in its earnings this quarter. Since November last year, three startups have been acquired which can focused on its advertisement service. These include the $350 million MoPub, $50 million Nano Media and $100 million TapCommerce.

More users = more success?

An important criterion used to judge Twitter’s performance is the number of Monthly Active Users (MAU). In the last quarter, its MAU stood at 271 million and analysts are expecting the number to surge to 287 million this time around. On the other hand, the Wall Street is hoping that Twitter will maintain its growth numbers from last year. Shares will fall if the expectations of analysts are not met. However, one should not completely depend on MAU since it is also subjective to drastic changes.

Buy, Hold or Sell?

According to a comprehensive review done by Bidness Etc, from a total of 41 analysts, 18 have given it a buy rating, 18 given it a Hold whereas the remaining five recommended a Sell.

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