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Twitter Earnings Not Cool, Yelp Earnings' Great Review, and ADP Tells Us About January Jobs

By Jack Kramer and Nick Martell – Feb 6, 2014 at 6:00AM

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Good morning, good lookin'. Here are the four things you need to know on Feb. 6.

If you're like us, you're probably taking the Greek-yogurt-diplomatic-catastrophe erupting between the U.S. and Russia pretty personally. And you're also not too pleased about the stock market's second drop in three days -- the Dow Jones Industrial Average (^DJI -0.90%) slipped 5 points Wednesday on some not-so-hot jobs news and big-time corporate earnings.
1. Twitter creates a $511 million loss in its inaugural quarter
Twitter (TWTR) announced big losses in its first-ever earnings report as a publicly traded company (mazel tov, Twitter). The social network has 241 million users (30% more than last year), and some ad sales now ($243 million) -- but the fact that Twitter has way more costs than sales freaked investors out.
The short-messaging juggernaut has never worried about profits in the past for two reasons: (1) It wasn't a public company, so it didn't need to disclose earnings to the public, and (2) profits didn't matter, as the goal was to create a trendy product, grow a massive user base, and pique the interest of advertisers. That's the same call from Mark Zuckerberg's Facebook playbook. But while FB has proved profitable, Twitter hasn't yet turned a profit.
Is "microblogging" worth the $37 billion? Twitter's enormous market value (measured by the market capitalization -- i.e., the sum of the value of every Twitter stock flying around out there) must be justified by huge future profits ... or else.
The takeaway is that Twitter's earnings report was full of bad news that well exceeded its 140-character limit -- The total losses of $511 million were double what Wall Street expected, and negative trends in user growth and costs caused a huge 18% drop in the stock in after-hours trading. The stock had risen 47% since its November '13 IPO, but Wednesday's earnings news was a #RealityCheckBro.

2. Wall Street gives Yelp earnings great review
Five stars for that fourth-quarter earnings report from Yelp (YELP -0.89%). Despite brutal amateur food photos and typo-packed reviews from hungry people with way too much time, Yelp stock popped more than 7% in after-hours trading Wednesday on the company's $70 million in revenues last quarter -- that number smacked analysts' expectations like they were bad fish tacos.

Interestingly, a jump in defamation lawsuits by business owners hit with bitter reviews didn't hurt Yelp's bottom line. In fact, the number of total reviews on the site rose by 47% to 53 million, and the number of restaurants listed grew by 69% to 67,000.

The takeaway is that it's all about mobile. Get used to it. More than half the traffic on Yelp came through smartphones in 2013, as did a third of the reviews posted. Now the company truly plans to focus on growing its mobile app usage in 2014, so you can eat that sloppy good BaoHaus pork bun in one hand, and unnecessarily tell the world how feel about it with the other.

3. ADP predicts poor January jobs report (thanks, winter)
The number of the day is 175,000. That's how many new jobs payroll-tracking firm ADP expects were added in January. That's lower than the 185,000 the economists were expecting (especially after the December jobs report failed to impress despite the impressive jobs growth throughout 2013).
Go and get a coat, 'cause it's time again to blame the weather (again). Just as absurd coldness (with an extra serving of polar vortex) has been hurting retail and home sales as people hide under blankets and North Face shells, ADP noted that the temperature caused businesses to add fewer workers.
The takeaway is that before you flip out, keep in mind that the ADP report is considered just a preview of the big, fancy, official monthly jobs report to be released by the Labor Department on Friday morning. That's what investors pay the most attention to. And that one is worth tailgating for.
4. Estee Lauder earnings don't look good
That wasn't pretty. Shares of beauty giant Estee Lauder (EL -0.91%) tumbled more than 5% Wednesday on an ugly earnings report -- profits slipped 3.4% last quarter thanks to the unimpressive U.S. shopping season for retailers.
The takeaway is that it's starting to look as if luxury retailers got coal from Santa, too, this year. But Estee is also blaming "cannibalization" -- the company introduced so many new skincare lines this past year that skincare sales fell, as consumers got confused and didn't try the new products. Sometimes too much is too much, Estee.

  • Weekly jobless claims
  • The U.S. International Trade Report (it's imports vs. exports, baby)
  • Fourth-quarter earnings reports: AOL, Expedia, Universal Studios
As originally published on

Nick Martell and Jack Kramer have no position in any stocks mentioned. The Motley Fool recommends ADP, Facebook, Twitter, and Yelp and owns shares of Facebook and Papa John's International. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,476.46 (-0.90%) $-305.02
Yelp Stock Quote
$27.96 (-0.89%) $0.25
Estée Lauder Companies Stock Quote
Estée Lauder Companies
$240.41 (-0.91%) $-2.21
Twitter Stock Quote

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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