Why Twitter Shares Plunged After Hours

As I write this, shares of Twitter Inc. (TWTR) are down over 12% after the social media platform posted its first ever quarterly announcement. For the fourth quarter, Twitter reported earnings of $0.02 per share on $243 million sales. This beat analyst estimates of a loss of $0.02 per share on $218 million in sales. So what was the problem?

Well, the issue is that Twitter’s user base isn’t growing as fast as it used to. In fact, the company just reported the lowest quarter-over-quarter gain in monthly users since it began disclosing these figures. In the fourth quarter, Twitter’s user base increased just 3.8% to 241 million. To put things in perspective, Twitter had previously reported 10% growth for Q1 2013, 7% growth for the second quarter and 6% growth for the third quarter.

The fact that this metric is decelerating does not bode well for next quarter’s sales and earnings. As it stands, the analyst community expects Twitter to post a loss of $0.03 per share on $215.2 million in sales for next quarter. For full-year 2014, the consensus is that Twitter will see a loss of $0.04 per share.

Twitter’s disappointing announcement is further confirmation that good things come to wait. The stock has been on the market for less than three months, so it isn’t even listed in Portfolio Grader because it doesn’t have four quarter’s worth of earnings data yet. I make it a rule to wait until a stock has “proven” itself on Wall Street before recommending it for new money.

While there was a lot of hype attached to Twitter and its recent debut on Wall Street, the company did not get off to a good start for this earnings season. I don’t plan on recommending TWTR anytime soon.

Sincerely,

Louis Navellier

Louis Navellier

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