Twitter Inc (ticker: TWTR) shares gained as much as 12 percent on Wednesday morning after the social media company reported a surprise jump in active users in its first-quarter earnings report. While Twitter certainly topped market expectations, the bar was set extremely low.
And looking ahead, the TWTR turnaround story still has a number of hurdles to clear.
The numbers. Twitter reported 328 million monthly active users in the first quarter, a 6 percent increase from a year ago. Twitter easily beat consensus analyst expectations of 321.3 million monthly active users. In addition Twitter also reported a 139 percent year-over-year jump in advertisement engagement, a key statistic for Twitter’s core advertising business.
“Twitter is becoming more relevant to consumers,” BTIG analyst Richard Greenfield says. “They are making their products easier to use. And there is a global thirst for news and information that they are benefiting from.”
The problem. Still, Twitter has a long way to go to compete with online advertising giants Facebook (FB) and Alphabet (GOOG, GOOGL). Despite topping consensus Wall Street expectations on both earnings per share and revenue, Twitter reported a net loss of $62 million, or $0.09 per share, before adjustments.
While adjusted EPS came in at 11 cents, crushing analysts’ penny-per-share estimate, the fact that TWTR isn’t making money on an unadjusted basis should be concerning to investors.
In addition, Q1 revenue of $548.3 million was down 7.8 percent compared to the same quarter a year ago. Wednesday’s report was the first time Twitter has reported a revenue slump since it went public in 2013.
“It’s a pretty interesting, and tough and brutal game for anybody who’s not Facebook and not Google,” Sun Microsystems CEO Scott McNealy says of the online advertising business. “They’re owning so much of the digital advertising space. And the space hasn’t really evolved as well, I think, as people wish it had.”
Earlier this year, Pacific Crest reported that Twitter’s average advertising revenue per monthly active user is only about $2.07 compared to $7.18 per monthly active user for Facebook.
The solution? Twitter CEO Jack Dorsey says…
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