Twitter cuts revenue forecast, shares slump
Twitter Inc (TWTR.N) posted quarterly revenue that missed Wall Street targets and cut its full-year revenue forecast due to weak demand for its new direct response advertising, sending its shares down as much as 24 percent on Tuesday.
Twitter projected 2015 revenue of $2.17 billion to $2.27 billion, compared with its earlier forecast of $2.3 billion to $2.35 billion. Analysts on average had been expecting full-year revenue of $2.37 billion.
Twitter said its new direct response ads that companies can tweet to targeted users, with say, a clickable business card or a link to drive traffic to the advertiser's website, did not produce the revenue expected.
The company, which allows users to broadcast 140-character messages, said revenue rose to $436 million in the first quarter from $250.5 million a year earlier. This was below the average analyst estimate of $456.8 million, according to Thomson Reuters I/B/E/S.
The numbers were leaked before the market closed. Market data firm Selerity tweeted the figures, saying it had found the release on Twitter's investor relations website.
"Investors were legitimately caught off guard, and there was nothing in the results that seemed optimistic," said Adam Sarhan, chief executive of Sarhan Capital in New York, who sold his stock in the company on Tuesday.
"Twitter is still growing, but if Twitter isn't optimistic about its results, why would investors be optimistic?"
The company's monthly active users rose 18 percent from the previous year to 302 million, in line with some analysts' expectations of slowing growth.
Twitter's net loss widened to $162.4 million, or 25 cents per share, for the quarter ended March 31, from $132.4 million, or 23 cents per share.
Excluding items, the company earned 7 cents per share.
Analysts on average had expected Twitter to earn 4 cents per share, according to Thomson Reuters I/B/E/S.
Selerity's tweet about Twitter's earnings raised questions about the social media company's internal control, said Brian Jacobsen, chief portfolio strategist at Wells Fargo Fund Management. (twitter.com/Selerity)
Ahead of earnings on Tuesday, Twitter said it had acquired marketingtechnology company TellApart to ramp up its direct response advertising.
Twitter shares closed down 18.2 percent at $42.27 on the New York Stock Exchange. They pared losses to trade at $43.16 after hours.