Twitter Nosedives After Q4 Revenue Miss, Tepid Outlook

Shares of Twitter Inc TWTR plunged more than 11 percent in Thursday’s pre-market hours after it reported mixed results for its fourth quarter and provided a lukewarm outlook.

Following is a gist of Twitter’s Q4 results:

• Twitter Reports Q4 Adj. EPS $0.16 vs $0.12 Est., Sales $717M vs $740M Est.
• Twitter Reports Q4 Average Monthly Active Users 319M, Up 4% YoY, Average Daily Active Usage Up 11% YoY
• Twitter Sees Q1 Adj. EBITDA $75M-$95M; Sees FY17 Capex $300M-$400M

The company reported a GAAP net loss of $167 million, or $0.23 per share for the fourth quarter. Excluding $101 million in restructuring costs, adjusted net income came in at $119 million, or $0.16 a share.

However, sales rose only 1 percent as strength in video was offset by year-over-year declines in revenue generated from traditional Promoted Tweet and direct response ad formats.

In a shareholder letter, Twitter said the following:

“We haven’t made the progress we anticipated over the last year in some direct response ad formats, both in terms of improvements to existing product features as well as the impact of new product features.”

Twitter acknowledged that increased competitive pressure resulted in a decline in its original Promoted Tweet engagement ad format.

Looking ahead, Twitter still expects its revenue growth will continue to lag audience growth in 2017 and could now be further impacted by escalating competition for digital ad spending.

The company noted its revenue would be hit by the re-evaluation of product portfolio, which could result in the de-emphasis of certain product features.

Twitter expects contributions from non-owned-and-operated advertising revenue to face significant headwinds in 2017 from factors impacting TellApart.

“We overcame the toughest challenge for any consumer service at scale by reversing declining audience trends and re-accelerating usage,” CEO Jack Dorsey said in a press release.

“While revenue growth continues to lag audience growth, we are applying the same focused approach that drove audience growth to our revenue product portfolio, focusing on our strengths and the real-time nature of our service. This will take time, but we're moving fast to show results,” Dorsey added.

Shares of Twitter closed Wednesday’s trading at $18.72.