Twitter is alive – Impressive user growth, revenue and positive forecast

When Twitter went public in November 2013, the shares traded at $26. There was a lot of hype around the company and the future growth potential and the market continued to push up the share price and valuation of the social media company. Just a month later the shares had reached their peak at almost $75! But it went downhill from there. The stock dropped below $40 this month and investors were already running scared that the share price would be approaching the IPO level if this quarterly report was not meeting expectations.

Well, Twitter delivered on pretty much all front, here are the highlights:

• Revenue: $312.2 million (compared to $139.9 million last year)
• Mobile advertising revenue: 224 million – 81% of total ad revenue
• Net loss: $144.6 million (compared to $42.2 million last year)
• 271 million average active users (increase of 24% from last year)
• 173 billion timeline views (up 15% compared to last year)
• Revenue projection:

Twitter shares jumped 30% in after-market trading and these numbers should stop the negative trend the stock has had all year.

The company seems to have found ways to finally have significant impact on their advertising income, especially the fact that 81% of that revenue was mobile advertising is encouraging.

There are a few questions we have though: a lot of the growth Twitter has seen was during the World Cup when new users took to tweeting and it was also a major event that kept people engaged. What is the strategy to continue the user growth and engagement?

In addition to that the company needs to start showing progress on the profitability side as well. Last month they hired Anthony Noto, a former Goldman Sachs executive, with him steering the financials we are confident there is a well thought through plan in place.

Facebook Financials – Mobile Ads Impress, Company worth almost $200 Billion

When Facebook went public in 2012 many investors called it a disaster. The first shares of the company were bought by investors for $38. But the stock crashed after the IPO, going down as much as 50% in the coming month and finally reaching a low point at around $14 when the company couldn’t deliver on mobile advertising growth and user growth over the next few quarters.

Well how things have changed and if you went long on Facebook at any point in the past you made the right bet.

Facebook closed at $74.98 which values the company at $192.4 Billion! In the past 12 months the stock has increased by 183%, the surge now mainly comes from impressive mobile growth numbers.

Here are the financial highlights:

• Revenue: $2.91 Billion (YOY increase of 60.5%)
• Mobile revenue increased 151% compared to last year, now accounting for 62% of total advertising revenue
• Net Income: $1.1 Billion
• Cash: $11.45 billion

These are all pretty impressive numbers and the same goes for the user base of Facebook. The company now has 1.32 billion users, of which 399 million are active mobile users (compared with 219 million in the same period last year).

The captain of the social giant, Mark Zuckerberg, is of course benefiting from the continued growth as well. With the current stock value he added a cool $1.6 billion to his net worth and is now ahead of Google founders Page and Brin on the rich list.

Facebook has continued to focus on expanding the business as well through acquisitions. Given the continued growth of the user base and the fact that the large acquisitions such as Instagram, WhatsApp and Oculus VR have yet to generate revenue gives the company a bright future.

Yahoo Financials – Advertising declines, new deal with Alibaba

A few days ago we posed the question “What is next for Yahoo?“.

After analyzing the two years under Marissa Mayer, how the share price has developed, acquisitions and other factors we concluded with a number of main aspects to focus on:

• Short-term Yahoo is going to rely on the growth and IPO success of Alibaba.
• Long-term they have to grown their user base, especially in the mobile segment and turn that into advertising revenue.
• Acquisition spree needs to slow down (Yahoo has bought 39 companies under Marissa Mayer). The focus needs to be on integrating these and deliver contributions to the bottom line

We were looking for the July 15th earnings of the company to give us some insight where the company is heading. The company announced a number of things directly related to what we focused on in our original article:

Yahoo owns 24% of Alibaba which is expected to have the largest technology IPO in history, with analysts valuing the company in the region of $200 billion. There was an agreement in place which forced Yahoo to sell 208 million shares but the company announced on Tuesday that the number of shares being sold in the IPO has decreased to 140 million.
What does this mean for Yahoo? They still generate a substantial amount of cash when Alibaba goes public, at the same time they will hold a larger percentage of the company than originally agreed which means investors and analysts will calculate a lot of the Alibaba success into the Yahoo share price and Mayer gets more time to continue her quest of turning the company around.

And looking at the recent quarter that is definitely something she needs:

The number of mobile users has grown under the new CEO but the company continues to struggle when it comes to generating advertising revenue.

Here are the financial highlights of the most recent quarter:

 

• Revenue: $1.08 billion (down from $1.14 billion during the same period last year)
• Profit: $270 million (down from $331 million last year)
• Display ad revenue decreased by 8%
• YOY advertising sales increased by 24% but the price per ad decreased by the same percentage
• Mobile, social and video ads have grown over 90% in a year but only make up a fraction of the overall revenue generated

Yahoo also decreased their forecast for the third quarter giving a range of $1.06 – 1.1 billion.

In our original article on the future of Yahoo we noted that the acquisitions have to start paying off and contribute to revenue and profits. The company has had several quarters to integrate their biggest acquisition Tumblr but so far the largest blogging network in the world has only given Yahoo more visitors but no visible revenue.

Marissa Mayer mentioned during the call that the transformation of the company will take several years. Holding a larger stake in Alibaba could buy her some time if the Chinese company performs strong after the IPO but regardless of that investors are going to focus more on more on the other aspects of the Yahoo business if the trend continues as it has.