Cardinal Trading: Twitter’s Q3 earnings meet analysts’ expectations but stock dives after it issues lackluster Q4 earnings forecasts.
According to Cardinal Trading, micro-blogging service Twitter saw its stock plummet by up to 10% in after-hours trading after it issued disappointing earnings forecasts for the final quarter of 2014.
The San Francisco, California-based technology company’s revenues beat estimates of $351 million comfortably, posting $361 million but it issued Q4 estimates in the range of $440 to $450 million against analysts’ forecasts that averaged out at $448 million.
“We’re not entirely sure that the guidance was the real problem here,” said Paul Sharkey, senior technology analyst at Cardinal Trading. “While the company managed to increase the number of monthly active users (MAU) by 13 million, it also revealed that those users didn’t view their timelines as often which could have implications for the company’s advertising sales revenues going forward,” he continued.
Twitter has moved to introduce additional revenue streams including one which enables users to purchase goods directly from ads in users’ timelines via a “Buy Now” button. It has also unveiled in-app promotions and video ads which are aimed at enabling the company to secure a slice of the lucrative social advertising market that rivals like Facebook monetize well.
Cardinal Trading says it remains skeptical of Twitter’s valuation citing the fact that the stock price values the company at 30 times revenues.
“We simply don’t see how a company that still posts a loss every quarter nearly a decade since its establishment can be valued at $30 billion or 30 times revenues especially when its own metrics show that users are spending less time engaging with the site,” said Sharkey.
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