Twitter shares crater after ugly revenue miss, shockingly weak guidance

Twitter shares sank Thursday after the social media company reported quarterly revenue that missed Wall Street’s expectations and issued guidance that fell far short of estimates.

Twitter posted fourth-quarter earnings of 16 cents per share on revenue of $717 million.

Analysts expected earnings of 12 cents per share on much higher revenue of $740.1 million, according to a consensus estimate from Thomson Reuters. In the previous year, the company posted 12 cents on revenue of $479 million.

The company adjusted its EBITDA guidance for the first quarter in the range of $75 million to $95 million. Wall Street expected an estimate of $191.3 million.

The stock tanked 10 percent immediately after the news.

Twitter also said it had 319 million monthly active users, up 4 percent from a year earlier.

Late last year, the company reported that its average monthly active users for a three-month period increased to 317 million. It also saw a 7 percent increase in its daily active users, thanks in part to the three presidential debates.

Twitter said total advertising revenue was $638 million, down slightly from a year earlier. U.S. revenue totaled $440 million, a year-over-year decrease of 5 percent. International revenue totaled $277 million, an increase of 12 percent from the previous year.

“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,” CEO Jack Dorsey said in a statement.

Jack Dorsey, CEO of Twitter and Square.

Rebecca Cook | Reuters
Jack Dorsey, CEO of Twitter and Square.

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.

However, Arete Research’s Richard Kramer told CNBC that advertisers may be leery of the platform so their brands don’t get targeted by Trump.

“I think whatever your political views, it’s clear that Trump is extremely divisive, and this isn’t really a positive for advertisers,” Kramer said on “Worldwide Exchange,” speaking ahead of Twitter’s earnings report.

Trump’s tweets have been known to move markets and have targeted high-profile people as well as major American companies.

—CNBC’s Anita Balakrishnan contributed to this report.

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