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Twitter: 3 Reasons I'm Actually Positive

Summary

Company was able to show user growth in Q1.

A meaningful reset of expectations helps against a back-loaded 2016.

Company will use its cash, or someone else will do it for them.

When I saw the headline numbers from Twitter (NYSE:TWTR) on Tuesday afternoon, I have to admit I was all ready to write an article titled something like "Twitter is not #Live, it is Dead." While the non-GAAP EPS figure beat expectations, revenues missed by a bit and the Q2 revenue guidance was awful. But after going through the report again, and seeing the stock take its associated hit, I'm actually positive on the name.

The first positive is that the company saw growth in its monthly active user count above street expectations. As you can see in the image below, the company is up about 8 million active users over the past year. Remember, these numbers don't include the roughly half a billion users that aren't logged in or registered.

Source: Twitter Q1 presentation

Management said it came in at the low end of guidance due to "brand marketers not spending as quickly as expected" in Q1. I think that's a direct correlation to two items: first, the stagnant user base growth we've seen, and two, the massive amount of product and management...


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