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Twitter's Growth Story Is in Question

By Mark Reeth and Evan Niu, CFA – Feb 6, 2014 at 4:00PM

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Twitter shares got slammed on the market today, after announcing that its rapid growth may not be as rapid as everyone was hoping.

Shares of Twitter (TWTR) fell out of the nest hard today, as the fledgeling public company reported its first quarterly earnings. Both fourth-quarter revenue and adjusted earnings per share were ahead of analysts' expectations, but the real story was slowing growth both in its number of new users added and in user engagement. Does this derail the investing thesis that Twitter can be as big as Facebook and is just getting started in terms of growth?

In this video, host Mark Reeth and Motley Fool tech and telecom bureau chief Evan Niu take a look at Thursday's stock of the day, Twitter, and discuss just how worried investors in the company should be after today's disappointing news and frantic market sell-off. Evan highlights the fact that Twitter may be less intuitive to use than Facebook, and that these numbers may signify the service being much more of a niche product than investors had hoped.

He also notes that even before the sell-off, Twitter looked very frothy and extremely expensive for what it is. Evan says he isn't buying on today's pullback, he'll be staying on the sidelines for this one.

Evan Niu, CFA has no position in any stocks mentioned. Mark Reeth has no position in any stocks mentioned. The Motley Fool recommends Twitter. We Fools may not 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.

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