Twitter shares enjoy their biggest gain in nearly a year
Twitter Inc. topped analysts’ projections for fourth-quarter revenue and added more new daily users than expected, citing product improvements and more personalized content on its social network. The company’s shares rose the most in almost a year.
Revenue rose 11% to $1.01 billion, slightly higher than the $994.5 million predicted in a Bloomberg survey of analysts. Twitter’s user growth was a bigger surprise. The company added 7 million daily active users in the period and now has 152 million people logging in daily on average, up 21% from the same period last year. Bloomberg Consensus estimates were for the company to finish 2019 with just 148.1 million total users.
In a statement Thursday, Twitter said that more than half of the 26 million daily users it added in 2019 were “directly driven by product improvements,” and its daily user base grew by “double-digit increases in all of our top 10 markets” in the fourth quarter. The company has made a public effort to improve user interactions on its service, and make it easier for users to find posts about topics they care about.
On a call with analysts, Chief Executive Jack Dorsey said that he sees Twitter “more as an interest network than a social network” and plans to push deeper into products that highlight that distinction. That includes products such as curated lists of followers, which Dorsey likened to a music playlist, and the ability to follow interests, not just other people.
The stock rose $5.02, or 15%, to $38.41 on Thursday. That was the biggest increase since April 23 and brings gains in the last 12 months to 11%.
Despite the positive numbers, Dorsey told analysts that Twitter needs to work faster. The company is notoriously slow when it comes to shipping new products and features. “The time it takes to go from an idea to shipping something wonderful to customers still takes too long,” he said.
The fourth-quarter numbers provide a stark contrast to Twitter’s third-quarter earnings report, in which the company missed its revenue projections, and the stock fell by more than 20%. At the time, Twitter also lowered its fourth-quarter outlook, and Thursday’s revenue total was at the high end of that revised guidance, but still lower than what analysts had initially projected heading into the quarter.
Last quarter, Twitter blamed some of its business challenges on a “bug” that enabled the company to mistakenly target people with ads using personal data uploaded for security purposes. Removing that data from its targeting arsenal hurt the company in the third quarter and was still a problem for Twitter in the fourth quarter, according to the company’s shareholder letter, which said that revenue growth was down “four or more points” as a result of the bug.
Still, Twitter beat estimates and said it expects $825 million to $885 million in revenue in the first quarter. Analysts on average are predicting sales of $868.9 million.
Things are going well enough that Twitter said it plans to increase spending by 20% in 2020, including a plan to increase headcount by 20% and build a new data center. Dorsey said Twitter plans to grow its workforce globally and emphasized the need to add employees outside San Francisco, where the company has its headquarters. It was just three years ago that Twitter was headed in the opposite direction, cutting staff and selling off assets to other tech giants such as Google in an effort to reach profitability.
The company posted net income of $1.47 billion for 2019, its second straight year of profitability after nearly 12 years of losses. Profit excluding certain items in the fourth quarter was $135 million, or 17 cents a share.
Questions remain as Twitter heads into a year featuring the Olympics and a U.S. presidential election. Twitter often cites major worldwide events as advertising and user-growth opportunities, though the company has also said that it will not sell political ads ahead of the election. Dorsey has also announced plans to work for at least three months in Africa this year, a decision that promises to test Twitter’s corporate structure. Dorsey already has two jobs — he’s also CEO of Square Inc.