From an investor standpoint I don't get why the stock is up 30%. I could understand if the stock was going to up 1-8%, but 30+%? Is it all the shorts covering? Is it the fact they brought in a wall street insider as CFO (Anthony Noto).
Wall Street was expecting a loss of 1 cent per share, but they surprised on earnings of 2 cents a share. Not a huge surprise.
Other things that irk me about the stock.
Management, I don't feel a warm and fuzzy having a non founder has a CEO. Nothing that Dick Costello has done to show me he has any long term vision.
They fired almost everyone is senior management. Which shows signs of instability.
*I haven't seen any product innovations come out of twitter from a end user standpoint organically.
The stock has already been hammered down over the past few months because last earnings report made it look like growth velocity was slowing but this earnings report shows that growth velocity is recovering (growth is accelerating) so a lot of these major concerns have been addressed and the price has now recovered back to where it was before these concerns. That's my analysis at least.
Usually, but not always with fast moving momentum stocks like TWTR. The initial movement is triggered by algorithms that try and figure out if the earnings report was good or not. I remember an absolutely wild Facebook swing after an earnings statement that went from huge up to down the next day (once it was mentioned on the conference call that teen usage was down).
There are going to be a ton of sellers tomorrow (if I had any shares I sure would), it will be interesting to watch. You know that some of the bears who got squeezed this afternoon are going to double down and be back on the hunt tomorrow.
TWTR traded like 27M shares in the first hour after the close today, which is roughly equivalent to the average _daily_ volume. This was not prices getting pushed around in a thin market.
Might it be that the new crop of greedy MBAs and investors on the Street are colluding, trying to find new and quick ways to extract lots of capital and make themselves wealthy by pumping up tech stocks?
The most important figure to look at here is the cash flow statement. Consider that they are actually cash positive from operations, but are spending more than 1.5x the cash they get from operations on buying companies. Consider also that a lot of their staff are cashing out on their stock options which is the big reason for the GAAP to non-GAAP differences in net income.
> Consider also that a lot of their staff are cashing out on their stock options which is the big reason for the GAAP to non-GAAP differences in net income.
They're giving away huge sums of investor equity to employees instead of having to pay them what they're worth, it's fair that this is recorded as an expense.
The funny thing about World Cup is that it happens every four years. Two for Olympics. World series, Stanley Cup and Super Bowl are every year. The bottom line is that people like twitter once they interact with it for any reason (like any of the above.) Once they are in they find a reason to stay. As more people around the world get mobile devices that can interact with Twitter, more people will start using Twitter (and Google and FB, etc.)
I've never been particularly bullish on Twitter's ability to make money, mostly because their business model isn't obvious to me. That being said, the fact that they are going to exceed $1 billion in revenue is really impressive to me. I've heard various bearish news over the years: Rails doesn't scale, they will never make money, user growth is slowing, etc. For a company with so many people betting against them, they seem to be pretty good at overcoming challenge's! It won't surprise me to see them making the big bucks in a year or two. Good luck Twitter!
No, you're correct. Their business model has to be and is going to be advertising, just as obviously as Facebook and Google's business models are.
Facebook is printing immense profits now. It wasn't that long ago a lot of people were proclaiming that could never happen. That's not to say Twitter will do the same, but it's entirely plausibly they can reach a modestly profitable ad-based business model off a couple billion dollar sales basis (which it seems they will be able to reach).
> Facebook is printing immense profits now. It wasn't that long ago a lot of people were proclaiming that could never happen. That's not to say Twitter will do the same, but it's entirely plausibly they can reach a modestly profitable ad-based business model off a couple billion dollar sales basis (which it seems they will be able to reach).
I'm not sure I would say immense, but they are certainly making profit. Facebook makes a little more than half the profit of HP (which many HN users may have forgotten still exists).
What is immense is its valuation of 80 times earnings even while the product is literally running out of humans left to be new users (let alone humans who have money).
I of course didn't say anything about their obviously outsized valuation, but I have to play devils advocate on the profit levels. I fail to see how tracking at a likely $5 billion in net income for fiscal 2015 is not immense. Just the $3.2 billion they'll likely do this year is immense.
That puts them in the top 200 global corporations in terms of profitability. That is truly immense - especially for a 10 year old business (that has only been a functional business for maybe five years).
Take for example McDonald's, they do $5.5 billion in profit. Who wouldn't consider MCD an immense business? Facebook will catch them in two years.
They're tracking a similar profit level as: Aflac, Metlife, Traveler's, Deere, Rio Tinto, Caterpillar, Inditex, Lockheed, Gilead etc. These are incredibly massive businesses.
HP did $1.2 billion last quarter. Facebook will catch that basis within four or five quarters at the rate they're going. HP is a 75 year old company.
> What is immense is its valuation of 80 times earnings even while the product is literally running out of humans left to be new users (let alone humans who have money).
This is what amazes me. The last few humans left without a facebook account are those earning $2 day. What possible business model can sustainably boost earnings 10x from here?
Also those that made a few fake facebook accounts to stalk people in highschool, but never had an actual account because they had not more than a handful of friends and did not want to give an american coorporation all their personal details. Oh, also countless variations Jesus and Mohammed accounts giving spiritual advice to strangers.
Well Rails doesn't scale, or at least it didn't at the time when Twitter jumped ship a few years ago.
Could argue that for the current earnings report to have even been possible, they had to move away from Rails; otherwise the user base could not have grown to what it is today.
Saying that, Rails' scaling story has likely improved since 2009/2010, I believe Github and other high traffic sites currently use Rails. For Twitter it was too late. Only high profile company I've heard of that left Rails for greener pastures.
That revenue number is an increase of 124% over the $139 million revenues from Twitter’s second quarter last year.
So yes, Twitter still posted a $145 million loss, but if we extrapolate (never good business practice, but an interesting thought experiment) and they do the same next year, they will be profitable by 2015.
It's unlikely that will happen, but there's light at the end of the tunnel.
There are a lot of one-time expenses involved with going public, so you'd have to strip those out of any extrapolation. But I'm not going anywhere near TWTR.
Twitter is an example of a business that has not, at least not as of yet, even come close to showing a justification for their valuation...or really, even being a publicly traded company.
I'm not saying it won't be, but there are companies that have gone public in the past two years with Billions (with a 'B') in revenue and solid profit margins where the stock is half of Twitter's share price, and those are much larger companies, similar share dilution, etc.
I know it's play money on a digital board, but some fundamentals cannot be ignored.
To be a business, you need to have higher income than expenses. So far, that has eluded Twitter -- and there's no indication that they are going to start spending less than they're making in the near future.
Also, I can see them making money from advertising. And after that... what?
I'm willing to believe and admit that Twitter is a game changer in many ways. But I'm far more skeptical of their ability to make money and survive. Clearly, Twitter's investors are bullish on Twitter's ability to make money. But if their optimism doesn't pan out soon, everyone with Twitter stock is going to be quite upset.
I'd just like to point out, their loss was pretty much solely the result of a $158 million dollar compensation expense.
"Net loss – GAAP net loss was $145 million for the second quarter of 2014 compared to a net loss of $42 million in the same period last year. Twitter's GAAP net loss included $158 million of stock-based compensation expense."
Thats probably why the "loss" is mostly irrelevant to the stock price increasing. Depending of course on what you think that business action means for the company.
As well, growth is accelerating (increasing at the margins [i.e. The derivative of growth is increasing]).
... Make of it what you will, that's the magic (investing) part.
Twitter are doing the old Facebook scam of having telco's freebie data use in return for getting people hooked on posturing and heart on sleeve 'sharing'...
Unfortunately, a lot of tweets include links to non-Twitter sites, which would not be included in freebie data. Will be confusing and/or disappointing for users, putting them behind a glass wall of look-but-dont-read.
This report is worthless by itself. Who cares about Year-over-Year numbers for a high growth company. The results vs the previous quarter are most relevant. Sure, there is a holiday effect in Q4 for ad businesses, but the QoQ comparison is the only thing worth looking at.
if you read the 8k, they doubled revenues but more than tripled losses. all this nongaap bullshit. read the footnotes. they removed stock based compensation and depreciation. how in the hell are those non operational charges? stock soars. hrm... lets make it look like were profitable so our lottery tickets are worth more. no thanks
Both are non-cash expenses, so makes sense to consider financials without them when looking at GAAP vs. Non-GAAP. They're certainly operational charges, but somewhat distort P&L.
I'm not even sure what you mean. They come out of shareholder equity, and all public companies use accrual and not cash-basis accounting. It makes zero sense to strip out those operational charges unless you want to appear profitable for some short-term benefit. I realize companies do this kind of crap. It absolutely does not make it right, and the folly of the stock market is just that: believing just because somebody said or did something that it is also correct, or that something is OK because it looks official on a SEC document.
Not saying I disagree. I don't think people should be looking at GAAP vs. Non-GAAP if they don't understand that one vs. the other doesn't make the company more or less profitable. My point is it helps better understand the company from an operational perspective when very high SBC or D&A can significantly distort actual expenses.
Wall Street was expecting a loss of 1 cent per share, but they surprised on earnings of 2 cents a share. Not a huge surprise.
Other things that irk me about the stock.
Management, I don't feel a warm and fuzzy having a non founder has a CEO. Nothing that Dick Costello has done to show me he has any long term vision. They fired almost everyone is senior management. Which shows signs of instability. *I haven't seen any product innovations come out of twitter from a end user standpoint organically.