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Sunday April 26, 2015



Twitter User Growth Declines

Twitter, Inc. (TWTR), a popular social media platform, announced its quarterly earnings on Tuesday, April 29. The company reported better than expected sales, but user growth declined steadily in the first quarter of fiscal 2014.

The company reported quarterly revenue of $250.49 million. This represents an increase of 119% from the same period last year when the company reported revenue of $113.34 million.

“We had a very strong first quarter. Revenue growth accelerated on a year over year basis fueled by increased engagement and user growth,” said Dick Costolo, CEO of Twitter. “We also continue to rapidly increase our reach and scale. With the integration of MoPub, we now reach more than 1 billion iOS and Android users each month, making us one of the largest in-app mobile ad exchanges in the world and the only one at scale to offer native in-app advertising.”

Twitter announced a net loss for the quarter of $132.36 million. This represents a greater loss than reported in the comparable period last year when the company announced a net loss of $27.03 million. Loss per share came in at $0.23 per share.

While Twitter announced solid first quarter revenue, user growth slowed from 30% during the fourth quarter of 2013 to 25% for the latest quarter. Twitter’s entire business model depends on getting in front of as many users as possible and monetizing those interactions through advertising. Thus, Wall Street investors are understandably focused on the decline in user growth rather than the increase in revenue. Twitter’s stock fell 12% following their earnings report. Analysts worry that Twitter users are beginning to lose interest in micro-blogging in favor of video and image sharing applications like Snapchat and Instagram.

Twitter, Inc. (TWTR) shares ended the week at $39.02, down 6.6% for the week of 4/28.

LinkedIn Lowers Guidance

LinkedIn Corporation (LNKD), an online professional networking site, reported its latest quarterly earnings on Thursday, May 1. The company reported strong revenue, but lowered guidance for the remainder of 2014.

The company reported quarterly revenue of $473.19 million. This represents a significant increase from the same period last year when the company reported revenue of $324.70 million. This was above analyst projections of $466.57 million.

“The first quarter was strong for LinkedIn in terms of our member engagement and financial results,” said Jeff Weiner, CEO of LinkedIn. “We made significant progress against several strategic priorities including expanding internationally with our China launch, extending our shift to content marketing, and furthering our goal to make LinkedIn the definitive professional publishing platform by giving members the ability to publish long-form content.”

LinkedIn reported a net loss of $13.32 million or $0.11 per share for the quarter. The company reported net income of $23.33 million during the comparable quarter last year.

Despite great revenue numbers, LinkedIn lowered its revenue guidance for 2014 to a range of $2.06 to $2.08 billion. Wall Street analysts had anticipated 2014 revenue of $2.11 billion. As a result, LinkedIn shares dropped almost 7% following the company’s earnings release.

LinkedIn Corporation (LNKD) shares ended the week at $147.73, down 6.4% for the week.

Expedia Reports Strong Revenue

Expedia, Inc. (EXPE), an online travel company, announced its latest earnings on Thursday, May 1. The company beat analysts’ estimates for both quarterly revenue and earnings per share.

Expedia reported revenue of $1.2 billion for the quarter. This represents an increase of 18.6% from the same period last year when the company reported revenue of $1.01 billion.

“We’re pleased with a solid first quarter performance and a good start to the year,” said Dara Khosrowshahi, President and CEO of Expedia, Inc. “From a geographic perspective revenue growth is healthy across all the major regions. Gross bookings growth of 29% was boosted by continued strong performance at most of our major brands in addition to the gross bookings generated through the Travelocity implementation. From a brand perspective, brand Expedia continued to deliver strong top-line performance as it continues driving innovation on its new technology platforms.”

The company reported a quarterly net loss of $14.30 million. Expedia reported a net loss of $104.23 million for the comparable quarter last year.

Expedia analyzed its travel search data and listed the top destinations for Americans during the summer of 2014. The most popular destinations in order by region were New York, Las Vegas, Los Angeles, Boston, Chicago, San Francisco, Orlando, Washington D.C., Seattle and Atlanta. Expedia also released data on the average price of flight within the U.S. - $499 – and the average price of a hotel room in the U.S. - $171 per night.

Expedia, Inc. (EXPE) shares ended the week at $71.15, up 2.1% for the week.

The Dow started the week of 4/28 at 16,363 and closed at 16,513 on 5/2. The S&P 500 started the week at 1,865 and closed at 1,881. The NASDAQ started the week at 4,092 and closed at 4,124.

Unemployment Rate and Treasury Yields Fall

Treasuries prices rose and yields fell this week as investors worried about increasing geopolitical uncertainty surrounding the situation in Ukraine. In addition, the Labor Department, the Commerce Department and the Federal Reserve all made announcements this week.

This week Russia called for another meeting of the UN Security Council on the situation in the Ukraine. The Council met on Friday, May 2. This is the thirteenth meeting of the Security Council so far on this issue and no solution has been reached. “There’s a concern that things are heating up there again,” said Larry Milstein, Managing Director of Government-Debt Trading at R.W. Pressprich & Co. in New York. “You saw the Ukranian military go into the eastern cities and office buildings. Those sorts of things definitely boost the Treasury market.” As a result, the 30-year bond yield fell two basis points to 3.4% during early trading on Friday, May 2.

The Labor Department released employment data for April on Friday, May 2. Overall, nonfarm payrolls rose by 288,000. This number is much higher than economists’ estimate of 218,000 jobs. The unemployment rate fell from 6.7% in March to 6.3% in April. The unemployment rate is now at its lowest level since September 2008.

“The economy is gathering momentum after the bad winter,” said Michael Gapen, Senior U.S. Economist at Barclays in New York. “The unemployment rate will stay in its downward trend, which means tapering will continue.” The “bad winter” refers to the Commerce Department’s report this week announcing that GDP increased only 0.1% in the first quarter of 2014. This is much lower than the 2.6% growth during the fourth quarter of 2013.

In addition, on Wednesday, April 30 Fed Chair Janet Yellen and the Federal Open Market Committee decided to reduce bond purchases in May by $10 billion to $45 billion. It is likely that as long as growth picks up in the next quarter and the unemployment rate continues to decline that the Fed will continue to taper its bond purchases. In addition, Yellen has stated that the Federal Funds rate will likely stay at its low level of between zero and 0.25% “for some time.”

The 10-year Treasury note yield finished the week of 4/28 at 2.59% while the 30-year Treasury note yield finished the week at 3.37%.

Interest Rates Decline Slightly

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, May 1. The report showed average fixed mortgage rates moving slightly lower upon the release of economic data this week.

The 15-year fixed rate mortgage averaged 3.38% this week. This represents a decrease from last week when it averaged 3.39%. Last year at this time the 15-year fixed rate mortgage averaged 2.56%.

This week, the 30-year fixed rate mortgage averaged 4.29%. This represents a decrease from last week when it averaged 4.33%. One year ago, the 30-year fixed rate mortgaged averaged 3.35%.

Frank Nothaft, Vice President and Chief Economist at Freddie Mac, commented on this week’s average mortgage rates. “Mortgage rates were down slightly following the release of real GDP estimates for the first quarter of the year which rose 0.1% and fell well short of market expectations. Meanwhile, the pending home sales index rose in March ending eight consecutive months of decline and the S&P/Case-Shiller 20-city composite house price index rose 12.9% over the 12-months ending in February 2014.”

The money market fund finished the week of 4/28 at 0.4%. The 1-year CD finished at 0.7%.

Published May 2, 2014

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