Twitter stock dips over user growth
Published 06/02/2014 | 01:57
Twitter beat Wall Street's earnings and revenue expectations in its first quarter as a public company.
But investors were looking for even more - including faster user growth - and the company's stock dipped as much as 12% in after-hours trading yesterday.
Twitter reported a loss of 511 million dollars (£313 million), or 1.41 dollars (86p) per share, in the October-December quarter.
That compares with a loss of 8.7 million dollars (£5.3 million), or 7 cents (4.3p) per share, a year earlier.
Twitter's revenue more than doubled to 243 million dollars (£149 million) from 112 million dollars (£69 million).
Analysts, on average, had expected an adjusted loss of 2 cents (1.2p) per share and revenue of 218.1 million dollars (£134 million), according to FactSet.
Twitter ended the quarter with 241 million monthly users, up 30% from a year earlier. That is slightly fewer than some analysts expected. Sterne Agee's Arvind Bhatia was looking for 244 million users, an increase of 32%.
But compared with the end of the third quarter, Twitter's user growth is slowing down. The company added just 9 million new monthly users, a slowdown from the previous three quarters, when it was adding an average of 16 million new accounts each quarter.
Even so, "they did have growth," said Gartner analyst Brian Blau.
"Maybe that wasn't the high standard that we have come to expect from (the likes of) Facebook," he added.
Besides growing its user base, Twitter "did OK on revenue" and on other fronts, Mr Blau said.
"They have good business standards."
Chief executive Dick Costolo sought to be reassuring during a conference call with investors and analysts.
He said changes Twitter made to the short messaging service during the fourth quarter are starting to pay off. For example, users are retweeting more posts and marking more of them as a "favourite".
Mr Costolo said the company will make it easier for people to start using the service and will also attempt to bring back inactive users.
"We think there's a lot we can do to significantly improve the user experience over the course of the year in 2014," he said.
San Francisco-based Twitter made its Wall Street debut in November with an initial public offering price of 26 dollars (£16). The stock price has more than doubled since.
Analysts remain confident about Twitter's business and long-term prospects, but many are calling its stock expensive compared with peers such as Facebook and LinkedIn.
Mr Blau thinks it is too early to conclude whether Twitter's slowing user growth signals trouble ahead. That is because Twitter's usefulness isn't as readily apparent to many people as Facebook and LinkedIn.
It takes just a few minutes to understand that Facebook is an easy way to create a digital scrapbook that can be shared with friends and family and that LinkedIn is a great place to post your professional achievements in hopes of getting better jobs.
But Twitter can be confusing for beginners, Mr Blau said, making it more challenging for the company to gain more users.
He said: "Twitter is all about connecting with real-time information. Once people get that, they tend to keep coming back and it opens up a whole new world of possibilities."
For the current quarter, Twitter is forecasting revenue of 230 million dollars (£141 million) to 240 million dollars (£147 million). Analysts were expecting 215.2 million dollars (£132 million).
Twitter's shares fell 7.32 dollars £4.49p), or 11%, to 58.65 dollars (£36) in extended trading after the results came out.
The stock, which peaked at 74.73 dollars (£46) on December 26, closed yesterday's regular trading session at 65.97 dollars (£40.44).