NEW YORK (AP) — Twitter beat Wall Street’s earnings and
revenue expectations in its first quarter as a public company. But
investors were looking for more — including faster user growth — and the
company’s stock fell more than 17 percent in after-hours trading
Wednesday.
Twitter’s shares fell $11.37, or 17.2 percent, to
$54.59 in extended trading after the results came out. The stock, which
peaked at $74.73 on Dec. 26, closed Wednesday’s regular trading session
at $65.97.
Twitter ended the final quarter of 2013 with 241
million monthly users, up 30 percent from a year earlier. But Twitter’s
growth is slowing. The company added just 9 million new monthly users in
the fourth quarter, only 1 million of which came from the U.S. That’s a
deceleration from earlier in the year, when the company was adding an
average of 16 million new accounts each quarter.
Another closely
watched metric, which measures how engaged users are with Twitter,
declined during the quarter, further spooking investors. Twitter said
its "timeline views," or how many times users refresh Twitter feeds,
visit Twitter or look at search results, declined 7 percent from the
previous quarter, to 148 billion from 159 billion.
CEO Dick
Costolo sought to be reassuring during the company’s conference call
with investors and analysts. He said changes Twitter made to the short
messaging service during the fourth quarter are starting to pay off. For
example, users are retweeting more posts and marking more of them as a
"favorite."
Costolo added that Twitter is rolling out "a number of
improvements" expected to boost user growth and retention. He said the
company will make it easier for people to start using the service and
will also attempt to bring back inactive users.
"We think there’s a lot we can do to significantly improve the user experience over the course of
the year in 2014," he said.
Twitter
reported a loss of $511 million, or $1.41 per share, in the
October-December quarter. That compares with a loss of $8.7 million, or 7
cents per share, a year earlier. Adjusted earnings were 2 cents per
share.
Twitter’s revenue more than doubled to $243 million from $112 million.
Analysts, on average, had expected an adjusted loss of 2 cents per share and revenue of $218.1 million,
according to FactSet.
That’s
slightly fewer than some analysts expected. Sterne Agee’s Arvind Bhatia
was looking for 244 million users, an increase of 32 percent.
Even so, "they did have growth," said Gartner analyst Brian Blau.
"Maybe
that wasn’t the high standard that we have come to expect from (the
likes of) Facebook," he added. Besides growing its user base, Twitter
"did OK on revenue" and on other fronts, Blau said. "They have good
business standards."
Three-quarters of Twitter’s advertising revenue came from mobile ads, compared with 53 percent for
Facebook in the same period.
San
Francisco-based Twitter Inc. made its Wall Street debut in November
with an initial public offering price of $26. The stock price has more
than doubled since. Analysts remain confident about Twitter’s business
and long-term prospects, but many are calling its stock expensive
compared with peers such as Facebook and LinkedIn.
Blau thinks
it’s too early to conclude whether Twitter’s slowing user growth signals
trouble ahead. That’s because Twitter’s usefulness isn’t as readily
apparent to many people as Facebook and LinkedIn. It takes just a few
minutes to understand that Facebook is an easy way to create a digital
scrapbook that can be shared with friends and family and that LinkedIn
is a great place to post your professional achievements in hopes of
getting better jobs.
But Twitter’s potpourri can be confusing for
beginners, Blau said, making it more challenging for the company to gain
more users. "Twitter is all about connecting with real-time
information," Blau said. "Once people get that, they tend to keep coming
back and it opens up a whole new world of possibilities."
For the current quarter, Twitter is forecasting revenue of $230 million to $240 million. Analysts were
expecting $215.2 million.
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AP Technology Writer Michael Liedtke contributed to this story from San Francisco.
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