Twitter's wings clipped by weak user growth

New York: Twitter shares went into a nosedive today after the company's first earnings report shook up investors expecting strong growth at the messaging platform.

The shares were down 19 percent at USD 53.41 in early trading a day after the company reported a USD 511 million quarterly loss and only sluggish growth in the number of users.

Stifel analyst Jordan Rohan downgraded Twitter, noting that "user growth metrics faltered" and adding that "the company did a poor job explaining how and why the lower user growth was a temporary phenomenon."

A similar warning came from Cantor Fitzgerald, where analyst Youssef Squali and colleagues said in a research note that "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 fair for at least several quarters," Squali said.

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 USD 242.6 million.

But the number of worldwide users was up just nine million from the figure of 232 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 USD 645 million from USD 79 million in 2012, even as revenues more than doubled to USD 664 million for the full year.

Trip Chowdhry at Global Equities Research said the revenue figures were better than expected but that Twitter needs to address 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 in a note to clients.

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