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Twitter: Q1 earnings

Summary of Twitter's earnings for its first quarter, following which shares went down 5.28% in after-hours trading (9.40pm).

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Revenue

Earnings per share

Expected

$241.5 million -$0.029

Actual

$250.5 million -$0.03

 

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Twitter has failed to live up to the hype, and the share price has reacted accordingly.

Twitter may have doubled its quarterly revenue and beaten analyst expectations but, akin to iPhone sales for Apple, user growth is the key tenet for the social media company. Growth of a mere 25% to 255 million, lower than the 30% growth achieved the previous quarter, tends not to inspire those investors looking for a profitable company with big potential.

While ad revenue appears to be on the up, and potential to expand internationally is an option, social media is becoming a competitive space. It’s perhaps clear now that the share price was exceptionally toppy since the IPO date and shareholders reminiscent of the demise of MySpace will be conscious of how a popular trend can quickly lose its appeal.  

As the chart below shows, we are now below the lows seen in late November. The descending channel remains in place, although over-enthusiastic bears should be cautious before piling in. The shares slumped 10% yesterday, taking us to the bottom of the channel, but on the previous two occasions this occurred (in February and April, points A and B) there was a sharp rally. The outlook for the shares is quite negative however, so once a post-results bounce is out of the way I expect the shares to head in the direction of $35. 

Twitter chart

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