Twitter Inc
TWTR NYSE

TWTR
Twitter Inc NYSE
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May 052021

Low guidance sends Twitter tumbling

Twitter is having a terrible time after releasing earnings last week that, despite beating all estimates, push prices down by over 17% in the days following, as concerns grow over rising expenses and a possible slowdown in user growth.

Stock of the social media company plummeted after it released Q1 earnings that failed to impress – especially following the ambitious plan for growth that the company laid out following its Q4 earnings release a few months ago. In the firm’s first analyst meeting in four years, Jack Dorsey in a (very long) online investor presentation in February made the strong case that investors should keep the faith, promising plans to grow its average daily users from about 200 million to at least 315 million, as well as double its annual revenue from the 2020 level of $3.7 billion to $7.5 billion in 2023. Last week's earnings were the first since the big promise - so how did they do?

Twitter reported earnings per share of $0.16 on $1.04 billion in revenue, compared to estimates of $0.14 cents per share on $1.03 billion; and reported 199 million monetizable daily active users (mDAUs) which is just shy of the 200 million expected but up 20% from the same period last year.

Revenue was up 28% from $808 million last year, and profit was a whopping $68 million contrasted with a loss of $8.4 million the same period last year. Ad revenue increased by 32%, another strong showing.

Twitter also provided some future guidance for the year though, and this seems to be what has got investors worried. The company now expects Q2 revenue to come in between $980 million and $1.08 billion, and warned that costs and expenses relating to a growing staff base could grow by up to 25% this year, which would increase the company’s stock-based compensation costs, which are now expected to hit up to $600 million for the full year, up from its previous estimate of $575 million at the top end.

“Q1 was a solid start to 2021, with total revenue of $1.04 billion up 28% year-over-year, reflecting accelerating year-over-year growth in MAP revenue and brand advertising that improved throughout the quarter,” said Ned Segal, Twitter’s CFO. “Advertisers continue to benefit from updated ad formats, improved measurement, and new brand safety controls, contributing to 32% year-over-year growth in ad revenue in Q1.”
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