The Twitter Trend Continues to Decline

If you would like to be notified of new TrendVesting Investment Ideas,or would like to make a specific research request, please fill out the form below. You can have your personal details removed at any time by emailing and including the word “unsubscribe” in the subject. Thank you!

Ahead of the Twitter trend

Twitter’s Q4 earnings report was issued this past Wednesday after market close and it wasn’t pretty. A recent Bloomberg article pointed out that revenue growth and user growth rates are at a standstill[1]. What’s most interesting is the fact that this has garnered so much attention in the press as if everyone is surprised by the fact that Twitter could perform so poorly.

In a previous post, titled ‘What Search Trends Means for Twitter Stock’ we described what we felt was waning interest in the platform and negative outlook for the company’s financial fortunes. We particularly pointed out that even for the countries where management expected user growth to outpace the negative trend in the U.S., that those countries also reached a peak and thus would impact the company’s financial performance. Judging by the most recent quarterly performance and management comments, we’d like think that we weren’t that far off.

So how exactly can we get a sense of waning interest in the platform?

Assuming you’re a new user or a company looking to market on Twitter for the first time, it is likely that a segment of you may start off with a Google search for the term ‘Twitter’. A continued uptrend in searches for ‘Twitter’ would suggest an increasing number of individuals looking to learn more and possibly adopt the platform while a decreasing trend would mean the opposite.

We point out that worldwide search trends for the term ‘Twitter’ have been down trending and most recently fell to a low not seen since January 2011. Keep in mind that google search data is normalized, which means that a drastic drop in searches in countries where the total number of searches for the term were not that large to begin with, could skew the worldwide search trend. But even if you were to isolate for searches in the countries where Twitter earns most of its revenues or even those countries where Twitter expects user growth to outpace its U.S. market (Argentina, Brazil, France, India, Japan and the Philippines), we see that in either of the cases, the trends are all negative, further hinting towards a flatlining or declining user growth rate.


What does this mean for Twitter’s Quarterly Performance?

Since the company has never made a profit, we’ll focus on revenues first. For the 4th quarter, the company came in with $717m, about $7m more than the same time last year, that’s a little less than a 1% increase. Considering that during the period they were handed a trump card in the form of a controversial Twitter user and presidential candidate of the same name, but were still unable to see revenues grow in a meaningful makes the performance appear that much worse.

We stress the same concerns with the Monthly Active User (MAU) metric which saw a 0.6% increase from the prior quarter and a 4% increase year over year. Management breaks this figure down between U.S. and International MAUs.  U.S. MAUs saw no growth over the prior quarter and 3% growth against the same quarter last year while international MAUs saw 0.8% growth over the prior quarter and 5% growth over the same quarter last year.

On to profits. As mentioned, the company wouldn’t know what profits looked like since it’s never made any. We note Q4 operational and net losses climbed 213% and 85% respectively year over year. Keep in mind that this substantially larger operational and net loss was realized on just a marginal increase in revenues of 1%.

Concluding Remarks

The Twitter keyword search trend basically tells the story of a company that has reached maturity but unable to turn a profit. Management can spin the numbers whichever way they want but investors will only benefit when the company is profitable or expected to be profitable in the near future, which Twitter is far from. Its net losses are substantial and in the face of stagnant revenues shows signs that the business model is broken. To get out of the red, it would appear Twitter will need to increase user engagement and user growth both of which are becoming increasingly difficult. We maintain our negative sentiment on the stock. Even if another bidding war erupted, we expect that the valuations will not change in a significant way as any profit oriented individual would never pay a large premium for a company that bleeds money. Suffice to say, get out while you can as we expect that things can get worse.



Please note that this research may contain information provided by the issuer that is freely available through public sources and may also contain assumptions and opinions of the author. It is highly recommended that readers cross reference and verify any information set out in this article. Any reference to third party reports and/or studies will be set out directly in the article or a supporting link will be provided. The purpose of this article is to provide supporting evidence for the continuation or reversal of existing stock price trend and does not outline specific security pricing nor financial estimates. TrendVesting, nor the author of this article does not currently nor in the preceding twelve months, as determined by the published date of this article, maintain any relationship, either first or third party, with the issuer that is the subject of this article. TrendVesting, nor the author of this article does not currently nor in the preceding twelve months, as determined by the published date of this article, maintain 1% beneficial ownership or greater of the issuer that is the subject of this article. TrendVesting, nor the author of this article does not currently hold any shares long or short or indirectly through a derivative security, of the issuer that is the subject of this article.  TrendVesting, nor the author of this article have not provided remunerable services of any sort to the issuer that is the subject of this article over the preceding twelve months as determined by the published date of this article. Trendvesting does not participate in any market making activities for any issuer, including the issuer that is the subject of this article.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.