Just How Bad Were Twitter’s Q3 Results?

(This story first appeared on Seeking Alpha (SA) today, and was written by Alessandro Pasetti, the founder of Hedging Beta.)

Summary

  • Slowing user growth is a big problem for Twitter.
  • Its income statement is mildly better than last year.
  • Pay attention to its capital structure and to the composition of adjusted EBITDA going forward.
  • Keep an eye on free cash flow metrics.

Twitter’s (NYSE:TWTRthird-quarter results left a bitter taste in the mouth of investors.

The social network isn’t growing as quickly as it should be based on its medium-term financing needs, and its stock plunged over 10% in after-hours trading on Tuesday.

Pressure

The shares are likely to open at about $27 on Wednesday, which is the lowest level since early August. A 10% drop today would not surprise me at all.

A sluggish growth rate in the number of users would be responsible for that fall, but here I’ll focus on Twitter’s cost base and cash profile in order to try and determine whether its losses are manageable, and what kind of impact, if any, its new CFO, ex-Goldman Sachs banker Anthony Noto, has had so far.

There’s good news and bad news.

 

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