Twitter Shares Tank Despite Big Revenue and Profit Gains

What to Know Before Twitter Reports Earnings Thursday

Clement Thibault, analyst at global financial platform Investing.com, said: "Total user numbers are down, but we've known for a while now that Twitter has a fake-users problem and is trying to deal with it, so that shouldn't come as a surprise to anyone".

"Twitter's pivot to mDAUs (monetizable daily active users) helps ad buyers better understand the potential reach for their advertising", said Aaron Goldman, chief marketing officer at 4C Insights. Analysts are expecting about $765 million, on average. Twitter also has room to grow by converting people who use the site infrequently into daily users, she said, which would allow the company to boost its revenue without having to grow its overall user base. Analysts had expected 25 cents, on average, according to IBES data from Refinitiv.

The company also posted another profitable quarter, its fifth consecutive period of profitability.Twitter brought in $909 million in revenue for the fourth quarter, up 24 percent from a year earlier, with a profit of $255 million, well more than double what it made during the same period in 2017.

In fact, as Twitter hunts down violators and eliminates fraudulent accounts, its monthly active user stats are shrinking, and the company plans to stop reporting that figure.

That's 60 million users less than Snapchat's daily count.

Twitter's operating costs are expected to surge by 20 percent year on year, a large increase from analysts projections of 12 percent.

Twitter says it has 126 million daily users.

In a statement, Twitter said that an mDAU is a user who is accessing its service "on any given day" and is able to be shown ads.

"Higher operating expenses, on the other hand, are a bigger problem, as I anticipate Twitter's margins and profits to shrink considerably in 2019".

Total advertising revenue rose 23 percent to $791 million.

Twitter sees a fraction of Facebook's 1.2 billion daily users every day as 126 million active users log on every day. $791 million of that figure comes from advertising revenue, split $425 million in the U.S. compared to $366 internationally - while data licensing making up the other $117 million. So, where does that it leave Twitter in increasing DAUs from a shrinking pool, points out R.W. Baird analyst Colin Sebastian, who has a Neutral rating and $35 price target on Twitter shares.

Twitter shares sputtered and then fell sharply after the report, dropping as much as eight per cent in pre-market trade.

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