As expected Twitter reported their earnings for the most recent quarter on Tuesday before the bell; and if you're a follower of The Binary Advisor, you knew exactly what to expect! As a matter of fact, the report and resulting market movement went play for play with an article we published earlier this week. Today, we'll go over the details of the report, how investors reacted, and what we can expect to see moving forward. So, let's get right to it…
The Details Of The Twitter Earnings Report
As expected, Twitter had an overwhelmingly positive result to provide when it came to earnings and revenue. Here's what we saw…
- Top-Line Revenue – In the top-line revenue arena, Twitter did incredibly well. While analysts expected that the company would only report $481 million in revenue, they actually reported $502 million in revenue for the quarter.
- Earnings Per Share – When it comes to earnings per share, Twitter also did exceptionally well; producing 7 cents per share. That's nearly double the 4 cents per share that analysts were expecting to see.
While earnings were overwhelmingly positive, there was one big issue with the report. Twitter is still struggling to bring in and retain new users. A key measure of growth for any social network is the amount of active users on the platform. When it comes to twitter, that number came in at 304 million; fractionally higher than the 302 million we saw in the last quarter. To make matters even worse with regard to user data, the company's executives aren't expecting things to get better any time soon. In a statement following earnings, Anthony Noto, Twitter's chief financial officer had the following remarks about user data…
“We don't expect to see sustained, meaningful growth until we reach the mass market… We expect it to take a considerable amount of time.”
Following that statement, here's what Twitter's interim CEO, Jack Dorsey had to say…
“Our Q2 results show good progress in monetization, but we are not satisfied with our growth in audience… In order to realize Twitter's full potential, we must improve in three key areas: ensure more disciplined execution, simplify our service to deliver Twitter's value faster and better communicate that value.”
How The Market Reacted
As expected, investors didn't seem to care much about Twitter's earnings once user data was released. While we did see a slight after hours increase in the value of the stock; as soon as user data came up in the earnings call, Twitter started to fall like a sack of bricks. On Wednesday, the company's stock closed at $31.24 after a decline of 14.5% from the stock's close on Tuesday.
What To Expect Moving Forward & How To Profit From The Trends
While we may see a slight recovery on Thursday, I'm not expecting that recovery to last very long. The reality is that Twitter's struggles with user data are likely to continue to be a daunting factor on its stock price. With that said, traders should watch for growth to resistance. From there, when the declines start again, start trading put options to turn the trends into profits.
What Do You Think?
Where do you think Twitter is headed and why? Let us know in the comments below!