The Strategist

Twitter devalued by 10%

02/10/2017 - 14:38

Twitter’s shares lost in value 10% after the company published its financial report for the fourth quarter of 2016. The microblogging service recorded not only the lowest level of income in its history, but also a 4% drop in the number of users.

Earlier, Twitter Inc. published a report on results of its financial and economic activity in the final quarter of last year. During the reporting period, volume of the microblogging service’s revenues amounted to 717 million US dollars, that is, only 1% more than in the fourth quarter of 2015. By the way, then Twitter demonstrated revenue growth of 48%.

Revenue from sale of advertising in the service was even lower than in 2015 - 638 million dollars against 641 million. The North American company is now experiencing increasingly more difficulties in finding advertisers, since the latter are not thrilled with growth rate of the platform’s user base. Bloomberg’s reporters noted that the service’s traffic increased by only 2 million over the last three months of last year, thus reaching the mark of 319 million users.

In general, volume of the service’s revenue totaled $ 2.2 billion in 2016, i.e. 12% more than in the previous year, while GAAP volume of losses reached 447 million immediately after publication of reports on results of the company’s financial and economic activity for the fourth quarter. Value of its shares fell by more than 7.9% during pre-trading.

Experts Interviewed by Bloomberg’s journalists agreed that there is identity crisis clearly traceable in the company. Currently, Twitter’s management has high hopes for development of its own video services such as live broadcasts of popular US sports. In addition, the microblogging service tries to hold the user base by launching innovative systems to counter trolling and abusive behavior of users.

According to James Cakmak, an equity analyst at Monness, Crespi, Hardt & Co., Twitter’s users generally understand the essence of this service. Moreover, users around the world in general have some idea of the mechanism of its operation. However, an average user does not clearly understand why he would need Twitter at all. Actually, this is the main problem of the microblogging service, says the analyst.

The past year was extremely unfortunate for Twitter, and that was enough for analysts to believe that the microblogging service is burned out. Twitter has no future, so the company’s shares will fall from the current $ 16-17 per security to less than $ 10 per share, says Trip Chowdhry, CEO of Global Equities Research at Uber-Bear report. The bad score is primarily associated with departure of senior managers, as well as poor financial performance 

Forecast of Global Equities Research about the future of Twitter is one of the most negative, says CNBC. 25 analyst firms recommend to hold the stock of social networks, eight - recommend selling. Eight companies, by contrast, recommend buying shares of Twitter.