Twitter Stock After Q1 Earnings

AP

It's an ugly start to the morning for Twitter. 

In pre-market trading, the stock is down 13%. The more time investors spend thinking about last night's earnings , the less they like what they see. 

After reporting earnings, Twitter was down 8%. Then after the call, it was down 11%. Now it's down 13%. 

Josh Brown of Ritholtz Wealth Management says that 11 Wall Street analysts have cut their target price for Twitter this morning [1] . 

The big problem for Twitter is that its usage growth has decelerated dramatically. 

Business Insider

It has 255 million monthly active users, which was up by 14 million sequentially. That growth is not good enough for a social network that wants to be a global, mainstream phenomenon.

To put Twitter's user growth in context, Facebook, which has over a billion users already, added 48 million users during that same period . Apple, which sells $600+ devices, added more new users over the last six months than Twitter . 

What's perhaps even worse is that Twitter CEO Dick Costolo said on the earnings call that daily active users are in the high 40 percent of monthly active users, which is flat with where it was pre-IPO. Facebook's daily active users are 63% of monthly active users. 

This ratio is particularly bad for Twitter because, Costolo defined Twitter's mission repeatedly on the call as being "the best companion experience to what's happening in their world." But if less than half of Twitter's users are using it on a daily basis, then clearly it's not the best companion for their life. 

Another problem: Timeline views per monthly active unique are down on a year-over-year percentage. On the call, Costolo attributed this to changes in Twitter's design. Instead of having to sort through the timeline to figure out a conversation, Twitter streamlined the process, putting it all in one thread. That cuts down on timeline views, but delivers a better experience. Costolo says favs and retweets are up 26%, which is a sign that engagement remains strong.

Twitter

Now, amid all the doom and gloom, there is a way to look at Twitter positively, if you want. 

On the call, Costolo said that Twitter is a mainstream service. "We had 3.3 billion views of tweets just about the Oscars in the 48 hours after the Oscars." He didn't cite where the number came from, but those views were across media platforms like newspapers, magazines, TV, and websites.  [2]

Twitter, as a service, is clearly well-known and mainstream.

And, despite the lower-than-expected user growth, Twitter beat expectations on the top and bottom line. This shows that Twitter has a solid business that can continue to grow, even if user growth isn't off the charts. 

Links

1. ^{^} cut their target price for Twitter this morning (twitter.com)
2. ^{^} said that Twitter is a mainstream service (seekingalpha.com)

source: www.businessinsider.com