Not long ago, Twitter (TWTR, $29.00) wasn’t exactly guaranteed a long and fruitful future. Its number of monthly users actually fell quarter-over-quarter in early 2016, and during the first quarter of 2017 its revenue fell for the first time ever. Never even mind the habitual losses Twitter had been booking since its inception.
A funny thing happened in its most recently reported quarter, though. In step with decent revenue growth, Twitter swung to a profit.
Granted, cost-cutting was responsible for most of the move out of the red and into the black. Twitter spent $70 million less on sales and marketing, for instance, and culled R&D spending by about the same amount. The cost-cutting clearly didn’t turn out to be a problem, however. The organization still has enough employees, enough users, and enough paying customers to make it viable.
Sure, Twitter has been lumped in with the likes of Facebook (FB), Alphabet (GOOGL) and other big-tech names with the recent privacy debacle, and rightfully so – Twitter collects a fair amount of information about its users too. JPMorgan analyst Doug Anmuth doesn’t think Twitter faces the same degree of risk its peers are, though, saying late last month, “We recognize that broader industry headlines around use of data and potential regulation may be around for some time, but we believe the pullback in Twitter shares on Data Licensing concerns is overdone and we would take advantage of recent weakness.”
Anmuth added, “TWTR’s execution is improving across both products and advertising, which we expect to drive 11 percent DAU growth in 2018 and accelerating revenue growth of 14%.”
