Twitter Inc (NYSE: TWTR) investors finally got the quarter they had been hoping for from the company. On Thursday morning, Twitter reported record third-quarter profits and a return to user growth after reporting no change in monthly active users in the second quarter.
Twitter reported non-GAAP diluted third-quarter earnings per share of 10 cents on revenue of $590 million. Both numbers topped consensus analyst expectations of 6 cents and $586 million, respectively.
In addition, Twitter added about 4 million users to its all-important monthly active user (MAU) count, bringing its total to 300 million users. Analysts were expecting 330.4 million MAUs. However, Twitter said that it has been consistently overestimating MAU counts by between 1 million and 2 million per quarter since the fourth quarter of 2014.
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Twitter doesn’t report its daily active user count, but the company said daily active user increased by 14 percent compared to a year ago, its sixth consecutive quarter of growth.
“This quarter we made progress in three key areas of our business,” CEO Jack Dorsey says. “We grew our audience and engagement, made progress on a return to revenue growth, and achieved record profitability.”
Twitter stock opened Thursday’s session up more than 11 percent, and Wedbush analyst Michael Pachter says Twitter’s modest user growth is enough to be a positive for the stock, which has attracted some short selling.
“They grew not a lot — 1 million in the U.S. and 4 million overall on a 326 million base — but that’s good enough I think for the shorts to think about covering,” Pachter said on CNBC.
He says Twitter’s 4 percent revenue decline is the one area Twitter needs to improve. The company guided for revenue to decline again in the fourth quarter.
Twitter’s stock has been exceptionally volatile over the past couple of years amid a constant swirl of buyout rumors. Pachter says at this point, he doesn’t see rumored buyers Facebook ( FB), Walt Disney Co. ( DIS), Alphabet ( GOOG, GOOGL) or Apple ( AAPL) as realistic takeover bidders. Pachter says Microsoft Corp. ( MSFT) may be the buyer that makes the most sense, but investors shouldn’t bet on a buyout.
“I think they’re stuck as a standalone company until somebody sees a strategic fit,” Pachter says.
[See: 8 Reasons to Avoid Short Selling Stocks.]
Wedbush has a “neutral” rating and $16 price target for Twitter.
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Twitter Inc (TWTR) Reports Record Profits, Falling Revenue originally appeared on usnews.com
