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There Are Still a Lot of Reasons to Be Nervous About Twitter

Twitter's (TWTR) third-quarter results were certainly better than feared, and the company's decision to pare its arguably oversized workforce is being received well. But sales growth is still decelerating, user growth remains minimal and investors shouldn't be under any illusions about what Twitter's unwillingness to provide fourth-quarter revenue guidance implies.

Twitter reported Q3 revenue of $616 million (up 8% annually) and EPS of $0.13 (up $0.03 annually), topping consensus analyst estimates of $605.8 million and $0.09. Unlike in prior earnings reports, the company declined to provide a sales outlook for the following quarter, citing a restructuring through which the company is cutting headcount by 9% and reducing the number of sales channels it has to two from three.

Thanks partly to the job cuts, Twitter hiked its full-year adjusted EBITDA margin guidance to a range of 27.5% to 28% from one of 26% to 27%. Full-year capital spending is now expected to be "no more than $360 million," or perhaps about 14% of revenue. Prior guidance was for a range of $300 million to $375 million.

With expectations low going into earnings -- see RBC and Oppenheimer's recent downgrades -- shares are up 1.2% as of the time of this article. They remain well below where they traded after rumors of buyout interest from Google, and Disney arrived in late September. Twitter plunged this month after fresh reports arrived indicating the...