Social media platform Twitter Inc. (TWTR, Financial) reported its third-quarter results before the opening bell on Oct. 26, rising on the chance of a potential fourth-quarter profit.
The California-based company posted earnings per share of 10 cents for the quarter, beating estimates of 6 cents. Quarterly revenue of $590 million beat expectations of $586.7 million but declined 4% from the prior-year quarter.
Shares jumped 11% in premarket trading following the report.
The trend in Twitter’s revenue growth since 2011 is illustrated in the graph below.
The social network reported advertising revenue declined 8% year over year, but data licensing and other revenue increased 22% during the quarter. Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter was $207 million, or 35% of total revenue, an improvement from $181 million, or 29% of revenue, in the year-ago quarter.
CEO Jack Dorsey praised the company’s progress in three key areas, namely growth in its audience and engagement, revenue growth and record profitability.
“We're proud that the improvements we're making to the product continue to bring people back to Twitter on a daily basis,” he said. “It's our job to help people stay informed about what’s happening in the world and what people are talking about, and we're focused on making our service faster, easier to use and more relevant to more people every day."
The company said it had to readjust its number of monthly active users (MAU) back to the fourth quarter of 2014 after discovering it had accidentally counted users of a third-party app service as its own. The impact of this was minimal, though, as the miscalculation accounted for only 1 million to 2 million users each quarter.
As a result, the social network reported 330 million MAUs for the quarter, which was shy of the expected 330.4 million users. It has added 4 million MAUs since the last quarter, a rate of 4% growth year over year.
The company’s number of daily active users (DAU) was not affected by this error. Twitter reported DAUs increased 14% during the quarter, but did not provide a specific number.
For the fourth quarter, the company projects adjusted EBITDA will fall between $220 million and $240 million, with the adjusted EBITDA margin between 35% and 36%. If Twitter hits the higher end of this guidance, it could be profitable under generally accepted accounting principles.
With 0.33% of outstanding shares, Jim Simons (Trades, Portfolio) has the largest stake in Twitter among the gurus. Steven Cohen (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and George Soros (Trades, Portfolio) are also shareholders.
Twitter has a market cap of $14.23 billion; its shares were trading around $19.29 on Thursday with a forward price-earnings (P/E) ratio of 49.02, a price-book (P/B) ratio of 2.97 and a price-sales (P/S) ratio of 5.63. According to GuruFocus data, the stock has gained 5% year to date.
Disclosure: I do not own any stocks mentioned.
