Twitter Inc was dismissed as a tool for dads and not a platform for the younger generations by an analyst on Tuesday. Yet, some folks on Wall Street think that CEO Jack Dorsey has the answers that would pivot the firm towards achieving its true potentials. However, Dorsey had to prove that he has all the answers when the firm reported Q3 2016 earnings after the bell on Tuesday. The third quarter results were supposed to be score sheet to grade Dorsey’s three months on the job.
Wall Street didn’t expect that Dorsey would have wrought a miracle in the last three months. The market understood that Twitter had serious issues with its user growth and that the firm has not unlocked the secret for monetizing its users. However, the actions of Dorsey after being confirmed as CEO portrays him as a man on a mission and Wall Street clearly expected to see that ambition going forward.
Twitter’s Q3 results by the numbers
However, it appears that Twitter is yet to get its act together and Jack Dorsey might not be able to put his house in order in fiscal 2015. The firm reported revenue of $569M to mark a 58% year-over-year increase and to beat estimates – but Wall Street did notice that this was the fifth straight quarter of slowing growth. The firm is still not making profits as it posted net loss $0.20 per share.
User growth remained a serious issue as Twitter reported that it added 4 million new users to bring its MAU to 320M up from 316M in the last quarter – most of the users are based overseas. Those users based overseas can pad up the user number for the firm but Wall Street doesn’t think that they can bring in money to the firm.
The market was not expecting Twitter to deliver strong results based on the trends in the first two quarters; but Wall Street hoped that Twitter would at least give a strong forecast as a sign that the worst was already over. Yet, Twitter didn’t give investors much hope going forward as it expects revenue in the range of $695M to $710M below the $739.7M that analysts had forecasted.
Dorsey is still learning on the job
Twitter didn’t explain the reason for the weak forecasts and it doesn’t appear as if Dorsey wants to under-promise so that he can over-deliver. He noted that the firm is still trying to get its bearing because the “focus is on three things: a more disciplined execution, simplifying our services and better communicating our value”.
Apparently, Twitter has not been able to make much progress in its focal points. Mark Mahaney at RBC Capital Markets noted that “The company is finding real challenges gaining traction with advertisers.” On the wake of the poor Q3 results and weak Q4 forecasts, shares of Twitter lost 13% after the bell. The stock is still down 3.46% at as midday trading today.