Twitter Rises on $4 Billion Buyback Even as Earnings Disappoint

This post was originally published on this site

By Dhirendra Tripathi – Twitter stock (NYSE:TWTR) climbed 2.7% in premarket trading Thursday after the company launched a $4 billion share buyback, including $2 billion on an accelerated basis, with immediate effect.

The remaining repurchases will be done over time once the accelerated buyback is complete, according to the company. The company said it look at ways to use cash on hand to fund the program, including tapping the markets.

The news of the buyback overshadowed a mostly disappointing quarter that saw it fall behind both revenue and earnings estimates. The outlook disappointed too, a signal Twitter’s efforts at attracting more advertisers and monetizing the platform through newsletters and ‘Spaces’ chat rooms will take time to yield results.

The stock initially gained over 6% before a faster-than-expected increase in U.S. consumer prices hit markets, reinforcing expectations of aggressive monetary policy tightening from the Federal Reserve. Such fears, as so often, hit technology stocks hardest.

The social media platform is now projecting its first-quarter revenue to be $1.22 billion at the midpoint of its guidance range. Even at the top end, it translates into a sequential drop of 19%. The annual comparison looks better, at a jump of 23%, broadly sustaining the trend seen in the fourth quarter’s figures.

Twitter expects another year of heavy costs from its stock-based compensation scheme, which will rise to $925 million from $630 million in 2021.

Monetizable daily active users, or users who see ads, grew 13% to 217 million in the fourth quarter, missing estimates. Ad engagements, which include clicks, fell 12%, partly owing to a shift toward video ads and other formats that take longer to attract users. They are, however, more profitable for Twitter.

Adjusted profit per share fell by 5 cents to 33 cents, some 3% below consensus forecasts.