Why Twitter Inc Shares Tanked

Is this meaningful? Or just another movement?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Apr 30, 2014 at 1:36PM
Technology and Telecom

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of microblogging giant Twitter Inc (NYSE:TWTR) plunged 10% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock had pulled back sharply since its December highs on serious concerns over slowing user growth, and today's Q1 results, coupled with conservative guidance, only reinforce those worries. While Twitter's revenue more than doubled, the company's monthly active users only increased 5.8% to 255 million over the three previous months, suggesting it might not have the mainstream appeal to become a super-sized social media platform like Facebook.

Now what: Twitter now expects full-year revenue of $1.2 billion to $1.25 billion, bracketing the average analyst estimate of $1.24 billion. "Revenue growth accelerated on a year over year basis fueled by increased engagement and user growth," said CEO Dick Costolo. "We also continue to rapidly increase our reach and scale. With the integration of MoPub, we now reach more than 1 billion iOS and Android users each month, making us one of the largest in-app mobile ad exchanges in the world and the only one at scale to offer native in-app advertising." More important, with Twitter continuing to boast a rock-solid balance sheet and its shares now at their lowest point since going public last fall, the downside might be limited enough to buy into that bullishness.