Twitter (TWTR): Surprise, Surprise with User Growth

After several quarters of disappointing user growth and falling revenue, Twitter (NYSE: TWTR) shocked short-sellers by reporting its first profit ever. It even reported user growth. With the short-squeeze playing out and the stock topping $34 a share after its quarterly report, what happens next?

Twitter reported earnings of $0.19 a share on revenue of $732 million. The revenue growth of 2.1% Y/Y caught analysts off guard and the shorts also, where short float is 5.9%. After months of uptrend from $16 to $24, the $30 level could be the next level of support. Yet despite some profit-taking following its earnings report on Feb. 9, chances are good TWTR stock will climb higher.

The 330 million MAU is a highlight in the company’s blowout quarter. The 4% Y/Y growth is modest but is still the third consecutive quarter where product improvements drove the increase. Information quality will improve and the company is set on pitching relevant, suitable and matching content to its users. That will translate to more users coming back, if not daily, then monthly.

New product With Video App Card

Twitter is investing in Video App Card to give advertisers two new ad formats. On its conference call it showed the right attitude in driving ad sales and revenue:

"We did see incremental dollars flow to Twitter as a result of the Video Website Card and the Video App Card, two newer ad formats, which were a positive driver in the fourth quarter. And we just like to think of those as examples of ways that we've been able to improve the dialogue and improve the investment in Twitter by advertisers."

Takeaway

Twitter cannot be underestimated any longer. After the stock settles, more gains await if management delivers next quarter.