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nvesting.com –Twitter (NYSE:TWTR) shares sold off heavily in early Wednesday action, reversing post-market gains as analysts sift out the good and the bad from earnings. In morning trading shares were down 8%.
The company reported 37% year over year revenue growth and appeared to be unaffected by the changes in Apple’s tracking system on iOS devices that rocked Snap Inc (NYSE:SNAP)’s Q4 guidance and to a degree Facebook Inc (NASDAQ:FB)’s. Twitter’s earnings release reported that the Apple (NASDAQ:AAPL) changes’ “Q3 revenue impact was lower than expected, and we have incorporated an ongoing modest impact into our Q4 guidance.” Analysts have cited either Twitter’s relative weakness in direct response advertising or relative strength in first party data as reasons it might have avoided the Apple concerns.
Earnings took a hit due to $766M in litigation charges, including a $809.5M shareholder class action lawsuit settlement. The company’s monetizable daily average users (mDAUs) grew 13% year over year, with most of the growth coming outside of the U.S. Most of the focus remained on Twitter’s advertising business, though the release did cover the roll-out of three new creator oriented products – ticketed Twitter spaces (live audio events), tips, and super follows.
Twitter guided for $1.5-1.6B revenue in Q4, and restated their target of $7.5B in revenue for 2023 even after selling MoPub. Twitter continues to guide to 30%+ expenses growth (and higher revenue growth) in 2021, but also guided for mid 20% expenses growth in 2022 before adjusting for any new investments next year. To achieve their $7.5B revenue target, Twitter will need to grow revenue at roughly 21% per year in the next two years based on Q4 guidance.
Analysts’ reactions were largely mixed, with more lowering price targets than raising them. Among those lowering their price target was Jefferies (NYSE:JEF) analyst Brett Thill, who cited a miss on mDAU expectations and uncertainty from the iOS changes. Aaron Kessler of Raymond James held steady and called the results solid, citing the revenue growth opportunities that were offset by higher than expected expense growth. Angelo Zino of CFRA reiterated a buy rating, saying, “We think results are impressive relative to peers, as TWTR appears to be better navigating iOS privacy changes as well as supply chain concerns given its greater exposure to services/digital goods.”
Twitter bought back $170M in shares in Q3, offsetting share-based compensation in the quarter.
