Coverage: Twitter shares tank on weak revenue growth

Twitter reported fourth-quarter earnings Thursday that showed weak revenue growth, which caused the social media company’s stock to drop 10 percent.

Lara O’Reilly of Business Insider had the news:

Twitter missed analysts’ expectations for its fourth-quarter revenue — reporting $717 million versus estimates of $740 million — as advertising spend lagged behind a recent acceleration in daily use of the platform.

The company did beat on earnings, however, on Thursday reporting earnings of $0.16 a share versus the $0.12 expected by analysts.

Twitter’s monthly active users grew to 319 million, up from 317 million in the prior quarter. Daily active use grew 11% year-on-year, up from growth of 7% in the third quarter, which the company credited to product improvements, marketing, and “organic trends.” The company still does not state its total daily active user figure.

Twitter’s stock was down 10.63% in premarket trading on Thursday.

In a press release, Twitter CEO Jack Dorsey described 2016 as a “transformative year” in which the company tried to focus on explaining why people use the platform and making it easier for them to use it.

Dorsey said: “We overcame the toughest challenge for any consumer service at scale by reversing declining audience trends and re-accelerating usage. As a result, in the fourth quarter, daily active usage accelerated for the third consecutive quarter, and we see this strong growth continuing. 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.”

Berkeley Lovelace Jr. of CNBC.com reported that the company also gave weak guidance:

Chief Financial Officer Anthony Noto said the company is hearing positive feedback from ad partners, however, “revenue growth will continue to lag audience growth due to the sales cycle, and could be further impacted by the escalating competition for digital advertising spending and our efforts to re-evaluate our revenue product feature portfolio.”

In the fourth quarter, the company said it made strides in the “Home timeline,” launching new features, including expanding its news and commentary.

“We also improved the relevance of notifications to increase engagement and bring people back to Twitter. These changes improved retention for both monthly active and daily active usage, as well as increased Tweet impressions and time spent on the service.”

On Wednesday, BTIG upgraded Twitter to buy from neutral with a price target of $25 due to rising usage trends from the political conversation around President Donald Trump‘s tweets.

“The incessant news flow from the Trump administration playing out on Twitter and the ensuing global reaction pushes Twitter users to be increasingly engaged with the platform,” analyst Richard Greenfield wrote in a note to clients.

Barbara Ortutay of the Associated Press notes that not enough people are signing up for Twitter:

Twitter’s role as a megaphone for the U.S. president, countless celebrities and businesses hasn’t attracted regular people to the service — not in the way Facebook has, or even Instagram and Snapchat.

The San Francisco company’s latest earnings report and dismal forecast suggest that this is unlikely to change any time soon. CEO Jack Dorsey acknowledged long ago that Twitter needs to do more to convince people why it’s useful.

“The whole world is watching Twitter. While we may not be meeting everyone’s growth expectations, there’s one thing that continues to grow and outpace our peers: Twitter’s influence and impact,” Dorsey said in a conference call with analysts on Thursday. “You don’t go a day without hearing about Twitter.”

But that doesn’t amount to much if Twitter can’t translate influence into boosting its user base, advertising and revenue. Rumors of a potential sale of the company have long swirled, but no buyers have emerged. Twitter has dismissed such speculation, doubling down instead on making the service safer, differentiating it from rivals and becoming profitable for the first time in 2017.

While Dorsey and Twitter have taken major steps recently to address some of users’ biggest concerns, including clamping down on hate speech and abuse , this has yet to make a notable difference in drawing new users. For the final three months of 2016, Twitter averaged 319 million monthly users, up just 4 percent from a year ago.