News Column

Twitter earnings disappoint investors

February 7, 2014

NEW YORK: Twitter shares took a nosedive after the company's first earnings report shook up investors expecting strong growth at the messaging platform.

The shares closed down 24 percent at $50.03 yesterday, a day after Twitter reported a $511 million quarterly loss and only sluggish growth in the number of users.

The figures "show signs of slowing user growth and engagementů suggesting that Twitter may be finding it more difficult to capture a more mainstream audience", said Morgan Stanley analyst Scott Devitt.

Stifel analyst Jordan Rohan downgraded Twitter, noting that "user growth metrics faltered".

"The company did a poor job explaining how and why the lower user growth was a temporary phenomenon," Rohan added.

A similar warning came from Cantor Fitzgerald, where analyst Youssef Squali and colleagues said: "Twitter has all of a sudden become a show-me story in the same way Facebook was challenged to prove its mobile credentials over a year ago.

"We now know how Facebook turned out, but we won't know how Twitter will fare for at least several quarters."

The first earnings report since Twitter's vaunted public offering in November offered a cold dose of reality for the company.

The results showed revenues in the quarter that ended December 31 doubled from a year ago to a better-than-expected $242.6 million.

But the number of worldwide users was up just nine million from the figure of È million when Twitter went public in November, suggesting only modest growth at a time when investors were looking for a surge.

Twitter said the loss for the year widened to $645m from $79m in 2012, even as revenues more than doubled to $664m for the full year.

Trip Chowdhry at Global Equities Research said the revenue figures were better than expected but that Twitter needed to deal with issues of credibility, including spam and duplicate user profiles.

"Twitter management should be focused on fixing the authenticity and credibility of the Twitter platform, just like Google and Facebook have done," Chowdhry said.

Deutsche Bank analyst Ross Sandler meanwhile kept a "buy rating" and said Twitter's results showed it was making progress in monetising its platform.

Sandler said he remained among those "who believe that Twitter is one of the best-positioned companies in mobile, and on its way to one billion users".

Twitter chief executive Dick Costolo spent much of an earnings call on Wednesday assuring analysts that Twitter was working on features and improvements intended to ramp up the number of users, along with how much it engaged with the global one-to-many messaging platform.

"It will be a combination of changes introduced over the course of the year that will change the slope of the growth curve," Costolo said.

The company also planned to get more visually engaging with pictures and video. The service's format of sharing in real-time with short text messages did not lend itself easily to traditional ad formats, so the company needed to get creative with marketing messages, according to Silicon Valley analyst Rob Enderle at Enderle Group. - Sapa-AFP

Cape Argus

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Source: Cape Argus (South Africa)

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