Twitter Stocks Boost, Lays Out Game Plan


Twitter executives sought to boost investor confidence about its future at its first analysts day Wednesday, laying out a game plan that supports its vision and projecting lofty growth, sending shares up nearly 8% for the day.

It’s been a tumultuous one year since the social media company went public, with shares down about 35% year-to-date on concerns about user growth, management turnover and ability to monetize.

One of the biggest problems that has plagued Twitter is questions about the scope of its appeal. While it has reiterated its goal of building the largest daily audience in the world, it has disappointed investors with slow user growth. In its third quarter, monthly active users rose to 284 million, up from 232 million a year ago and paling in comparison to Facebook’s 1.3 billion monthly active users. This has caused some investors to wonder whether Twitter is a more niche product. The bears “are concerned about the ultimate size potential of the user base,” said SunTrust analyst Robert Peck, while the bulls believe “in the long term monetization opportunity and re-invigoration of user growth.”

So on Wednesday, Twitter tried to shift the conversation, asking investors not to focus only on its 284 million monthly active users but also consider the more than 500 million logged-out visitors it attracts every month as well as the more than 185 billion impressions it generates from tweets embedded on other websites.
“Prior to now, our strategy only allowed us to focus on that audience of 284 million users, and not the audience of 500 million users that already exist on our platform,” said chief financial officer Anthony Noto.

According to Costolo, two of the company’s main goals are growing its core monthly active user base and reducing barriers to consumption across its entire audience.

Twitter has been criticized as difficult to understand. “We know we need to do a better job of selling users on Twitter,” said VP of Product Kevin Weil, who went on to outline a simpler sign-up process and features like an “instant timeline” that would surface interesting content without the legwork of finding people to follow. “We are creating an entire new framework for helping new and struggling users learn the basics of Twitter,” said Weil.

Growth and innovation is something else investors were watching. “What new products should we expect over the next 12 months that will showcase the company’s faster pace of innovation?” asked Baird analysts Colin Sebastian and Benjamin Gaither in a recent note to clients.
To that, Costolo answered: “Moving forward, you can expect us to accelerate the pace and breadth of product change.” During the course of the day, Twitter outlined plans for a slew of new features such as direct messaging, consumer video, and location-based and personalized tweets. One upcoming feature is a “while you were away” section that highlights high-quality tweets you missed since you were last on the site.

It hopes new product developments will help it grow its core monthly active user base by two times to 550+ million in the intermediate term and three to four times to 1+ billion over the longer term. It’s defining the “intermediate term” as 5-8 years, but wouldn’t give a timeframe for “the longer term.”

Regarding management turnover (a number of top executives have been in and out of the door since its IPO), Costolo commented that he “couldn’t be more proud” and is “confident that we have precisely the right team right now.”

“Good tech management is hard to find,” said Allianz Global Technology Fund portfolio manager Walt Price on CNBC Wednesday morning. “I really like Anthony,” he said, referring to former Goldman Sachs banker and CFO Anthony Noto. “Maybe [he and Costolo] are the magical combination they need to rejuvenate the company.”

The young company reported one penny of non-GAAP earnings per share in the third quarter and revenue of $261 million, beating forecasts of $251 million. It is forecasting revenue of $440 million to $450 million in the fourth quarter, in line with analyst expectations of $448 million.

Where does it see itself in ten years? Making a cool $14 billion in revenue, putting it in the same league as tech giants like Amazon and eBay.

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