Don’t Get Too Excited About Twitter’s Turnaround

Don’t Get Too Excited About Twitter’s Turnaround

There is legitimately good financial news coming from Twitter Inc. for the first time in more than a year. But investors may be overly enthusiastic about the mild signs of progress. Revenue in the fourth quarter inched up about 2 percent from a year earlier, the only quarterly sales increase in 2017. Reversal Twitter's revenue grew in the fourth quarter, and the company's forecast indicates a further increase for the March quarter. (Bloomberg L.P., the owner of Gadfly, produces a video news network on Twitter.) The number of its monthly users was flat from the previous quarter, which shows that just when the company is trending up in advertising sales it is having difficulties luring people to its digital hangout. Grounded The number of Twitter monthly users in the fourth quarter was flat from the prior three months Monthly active users, change from the prior quarter Source: Bloomberg But if Twitter's audience doesn't grow, that puts more pressure on Twitter's advertising department to squeeze more revenue from existing users. Ideally, Twitter wants to increase the number of users, how much time they're spending on Twitter and the ad sales per user. Wall Street has been anticipating Twitter's financial recovery, and a return of Twitter takeover rumors likely have lifted shares as well. The company's enterprise value now stands about nearly 7 times expected revenue in the next year, according to Bloomberg data.

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There is legitimately good financial news coming from Twitter Inc. for the first time in more than a year. But investors may be overly enthusiastic about the mild signs of progress.

It is worth congratulating Twitter for not shrinking anymore. Revenue in the fourth quarter inched up about 2 percent from a year earlier, the only quarterly sales increase in 2017. And Twitter’s forecast for the quarter ending in March suggests that revenue growth is likely to continue. Twitter also pulled off what executives promised in late 2016: its first ever profit under conventional accounting standards.

Reversal

Twitter’s revenue grew in the fourth quarter, and the company’s forecast indicates a further increase for the March quarter.

  • Change in revenue from a year earlier

Source: Bloomberg

Note: The first-quarter revenue figure is the midpoint of the revenue range implied by Twitter’s Ebitda forecast

The dual growth and profit milestones show Twitter’s efforts to slash its spending, halt unpromising advertising products and double down on web video has paid off in a business recovery — albeit one that amounts to crawling halfway out of a deep, dark hole. (Bloomberg L.P., the owner of Gadfly, produces a video news network on Twitter.)

But Twitter isn’t out all the way yet. The number of…

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