Twitter slammed after user growth slows, stock down 24%

CEO Dick Costolo already working on a plan to bring in more users

Financial trends and news by Steven Loeb
February 6, 2014
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Shares of Twitter were absolutely slammed on Thursday, after a mixed earnings report on Wednesday that beat expectations but showed slowing user growth.

The stock ended trading down $15.92, or 24.13%, to $50.05 a share.

In the report, Twitter saw its average monthly active users (MAUs) grow 30% year to year to 241 million, while mobile MAUs increased 37% to 184 million. They represented 76% of the company's total MAUs.

"Despite high brand awareness, high visibility in media channels, and increased publicity around its IPO in November, Twitter’s user growth was muted and we remain concerned about the continued deceleration in MAU growth," JP Morgan analyst Doug Anmuth wrote in a note.

"Twitter maintains some of the industry’s strictest limits on ad load in order to optimize for user experience, and the company is launching several initiatives through 2014 to accelerate user growth and improve user retention. These include simpler on-boarding processes with a native mobile sign up and messages to reengage inactive users."

Still, Anmuth also raised his price target on the stock from $40 to $44.

"We recognize that it is still early in potential user growth, and certainly in ad monetization and product innovations, but the challenges around user metrics in 4Q are likely to raise more questions around whether Twitter can become a truly mainstream product. We think overall engagement concerns are likely to overshadow monetization strength in the near term," he wrote.

Twitter CEO Dick Costolo addressed the issue of user growth in a conference call on Wednesday afternoon.

"With confidence in our ability to scale revenue, we are doubling down in 2014 to accelerate the growth of our core user base," he said.

"One of our core values as a company is to reach every person on the planet, and in 2014 we're focused on building a Twitter that is truly accessible and valuable to everyone."

Earning results

The company posted revenue of $243 million, up 116% from $112 million year to year, while analysts had been expecting quarterly revenue to be $218 million. Twitter reported non-GAAP EPS of $0.02, which beat expectations of a loss of 2 cents.

It also posted a net loss of $511 million the company, which is more than double its quarterly revenue. The company saw a net loss of $9 million in the same period last year.

Almost all of Twitter's revenue came from advertising, which accounted for $220 million, a 121% year to year increase. Of that revenue, more than 75% came from mobile. Data licensing, and other revenue, came to $23 million, an increase of 80% year-over-year.

Of Twitter's total revenue, 27% was International, an increase of 200% year-over-year.

Timeline views reached 148 billion in the fourth quarter of 2013, an increase of 26% year-over-year, while advertising revenue per thousand timeline views reached $1.49 in the fourth quarter of 2013, an increase of 76% year-over-year.

For the full year 2013, Twitter reported revenue of $665 million, up 110% year to year, and a net loss of $645 million.

Twitter is projecting revenue of between $230 and $240 million, with adjusted EBITDA in the range of $10 million to $16 million, for the next quarter. For the full year 2014, it expects to see revenue between $1,150 million to $1,200 million, with an djusted EBITDA in the range of $150 million to $180 million.

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