Twitter Inc (TWTR) Shares Tank As User Growth Slows

Twitter will never be Facebook, and that is clearer than ever. I have no business relationship with any company whose stock is mentioned in this article.

To be fair, the company is still more or less being gauged on the growth of its monthly active users.

Below is a look at the stock’s decline as it now sits. Twitter is rapidly trying to roll out products that will help make the service better, like trying to curb harassment and making the service easier to use with algorithmic feeds. Investor sentiment has improved, with shares up 34% since the company posted first-quarter earnings on April 26 that beat on the top and bottom line. The problem, however, was that the estimates that were beaten were terrible in the first place.

Meanwhile, the company’s official statement acknowledged that its $574 million in total quarterly revenue represented a five per cent decrease year-over-year, and that its net loss of $116 million represented an increase of nine per cent year-over-year. This isn’t very reassuring now that user growth has come to a halt sequentially. The company cited “lower seasonal benefits and other factors” for the poor showing on the monthly user metrics.

However, those numbers were flat with what Twitter reported during the first quarter of this year, and were also almost a million users shy of analysts’ consensus forecast for 328.8 million users.

For its part, Twitter has encouraged investors to focus on other areas for user engagement.

Stock-based compensation will eat up much of that, and is expected to be between US$100mln and US$110mln.

Who wants to pay a growth premium for a company whose growth has stopped? Average daily active users (DAUs) grew 12% year-over-year.

That kind of growth looks sustainable too.

To drive user growth, Twitter has tried bringing in users with email and push notifications, as well as timeline changes and redesigned elements of its site, including real-time notifications when a user “likes” a Tweet, which they say has resulted in increased usage.

Advert engagement in the industry grew 95 percent year-on-year in the second quarter. Analysts had anxious about stagnating user growth for Facebook as well, but the network still managed to grow its daily active users to 1.32 billion daily active users – up from 1.28 billion the previous quarter.