Slow rise in the number of users and an inevitably slow business from ad inventory due to the sluggishly rising user count are expected to bring trouble to Twitter’s revenues. Analysts from Wall Street think that the company’s business is declining and the company is expected to report a year-over-year decline in revenue, which would be the company’s first ever loss, when the earnings are released on Wednesday.
Analysts estimate the company will record profits of around one percent per share on the 2017 Q1 revenue of US$512 mn. If the estimates are correct, the company would have suffered a loss of around 14% as compared to the US$595 mn that the company generated in revenues during the 1st financial quarter of 2016. Twitter has reported year-on-year growth in revenue for every quarter ever since it has gone public in the late 2013.
Declining Number of New Users could also mean Decline in Ad Revenues
Wall Street’s estimates regarding Twitter’s business could be wrong as well, but a decline in business is, of course, bad for the company as it is seeing a plateau when it comes to number of new users. Decline in the number of new users would also directly impact the company’s revenue from ads – the easiest way to generate revenue for a social media company.
But if Wall Street’s analysis proves correct for the company, Twitter has a tough road ahead to frame its slowing revenue stream. If the earnings are indeed low, possibilities of takeover will start doing rounds in business circles. The company was also exploring sale options the previous year but the price tag was a bit high for most companies interested in buying it.
Last year, the company was valued at around US$13 bn, which was when analysts estimated that it could be sold at around US$18 bn. Now that its valuation has come down to US$10.7 bn, it will be interesting to see how much the company is valued for possible suitors.