Twitter Stock Skyrockets After Q4 Earnings, But Analyst Downgrades Company

Twitter’s stock price skyrocketed by 30 percent after it announced its Q4 earnings, however an analyst downgraded the company to sell rating on Thursday, according to CNBC.

Twitter saw its stock price rise to $35 on Thursday morning, closing at $30.18 at the end of the day. Shares were trading at $30.60 during after-hours. The rise comes after Twitter posted its first profitable quarter. The company said it made $91 million in Q4 2017 on $731.6 million of revenue, a two percent year-over-year increase. However, Twitter’s revenue for the fiscal year decreased by four to eight percent year-over-year.

It’s also worth noting that Twitter spent much of its time in the fourth quarter explaining Russia’s use of the platform during the 2016 presidential campaign. Twitter admitted last fall that it found 2,752 accounts tied to Russian government-linked accounts. Last month, the company said it found 1,062 additional accounts.

“Q4 was a strong finish to the year,” Twitter CEO Jack Dorsey said on Thursday. “We returned to revenue growth, achieved our goal of GAAP profitability, increased our shipping cadence, and reached five consecutive quarters of double digit DAU growth. I’m proud of the steady progress we made in 2017, and confident in our path ahead.”

The social media platform didn’t impress with its number of users. Twitter monthly users increased by four percent year-over-year, but when comparing quarters, the number remained at a total of 330 million users. Meanwhile, Facebook has over two billion users. When looking at the U.S. alone, Twitter saw its number of users decrease from 69 million to 68 million. The decline marks the second time the number of monthly users on Twitter decreases in the U.S. in 2017.

Taking the earnings report into consideration, an analyst at Pivotal Research downgraded Twitter saying the new figures are “hardly a game-changer.” The analyst described Twitter as a “niche-y” company that won’t do well against rival platforms in the ad market.

"Overall, the results represented ongoing progress which was consistent with our longer-term expectations for Twitter as a durable, if niche-y (but highly differentiated), platform for digital advertising which should eventually be able to approach industry-level growth rates," the analyst, Brian Wieser, said in a note to clients Thursday. "We don't think Twitter's appeal will break out of its niche status any time soon. This severely limits its revenue potential, as Facebook and Google will continue to capture the bulk of the growth in spending for digital advertising."

The analyst retained his $21 price target for the company’s stock. He predicts Twitter could grow its sales by 11 percent this year, but notes that it was already priced into the shares.

"We can look at the most recent period's results as marking an important milestone in the company's turnaround, perhaps bringing the future forward by a quarter," he said. "While we can see this as positive for sentiment and investor confidence, it's hardly a game-changer for Twitter."