Can Twitter Shares Return to All-Time Highs?

Media

Published: July 30, 2014 6:54 am

Twitter Inc.’s (NYSE: TWTR) earnings were so good that the stock rose 26% after hours to $48.55. That is still very far short of its all-time high of $74.73. It will be extremely hard for the stock to get back to that level. Twitter may have released the best news of its short life, and its earnings momentum is not likely to get any better.

Revenue rose from $139 million in the second quarter of last year to $312 million. On a non-GAAP basis, Twitter earned $15 million, compared to a loss of $16 million in the same quarter a year ago. However, Twitter said revenue in the current quarter could be as low as $330 million, which would be very modest for sequential quarter, as well as a signal that its surge in revenue may not continue at the second quarter pace.

Additionally, Twitter’s key metrics were extraordinary:

Average Monthly Active Users (MAUs) were 271 million as of June 30, 2014, an increase of 24% year-over-year.

Mobile MAUs reached 211 million in the second quarter of 2014, an increase of 29% year-over-year, representing 78% of total MAUs.

Timeline views reached 173 billion for the second quarter of 2014, an increase of 15% year-over-year.

Advertising revenue per thousand timeline views reached $1.60 in the second quarter of 2014, an increase of 100% year-over-year.

The figures were so good that it begs the question whether they can be improved on at the same rate.

The history of tech companies includes a small number of firms with extraordinary, triple-digit growth rates. However, even for Google Inc. (NASDAQ: GOOG) and Amazon.com Inc. (NASDAQ: AMZN), those figures slowed to improvements of 20% to 30% year over previous year. Both of those companies are large enough that the drop off is acceptable. Twitter has a long way to go before it approaches Amazon and Google annual revenue run rates, which are moving toward $100 billion.

The single biggest issue with Twitter’s second quarter is that it was too spectacular. There is nothing it can follow it with that will be as impressive. Twitter shares may rise, but they will stay below their all-time high.

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