Twitter No WhatsApp

Twitter, $TWTR, isn’t on track to hit the billion user tipping point. That was the verdict on StockTwits.com after the micro-blogging social network’s first quarter earnings announcement Tuesday evening.

Difference between a "niche medium" & its grander counterpart will be interesting to learn in months ahead http://stks.co/h0YTb $TWTR $FB

— Dan Ramsden (@d_ramsden) Apr. 30 at 07:28 AM

The stock opened more than 11% lower Wednesday. Twitter’s financials couldn’t be blamed for the fall. Excluding some items such as stock-based compensation, Twitter reported a break-even quarter on $250 million in sales. That beat analysts’ calls for a loss of $0.03 per share on $241 million in revenues.

User growth, however, disappointed. The number of monthly active users increased 25% year-over-year. Last quarter, that number increased 30% compared to the fourth quarter of 2012.

$TWTR after last ER TWTR collapsed 25% in one day. And their user slowdown wasn't THAT bad like this ER. Hmm…

— Alex Cusack (@accounts) Apr. 30 at 08:41 AM

Sequentially, the number of monthly active users grew 5.8% to 255 million. That growth is relatively anemic compared to, say, WhatsApp, the messenger service Facebook, $FB, acquired for $19 billion earlier this year. WhatsApp has 450 million users and is adding them at the rate of one million per day.

As of the open, Twitter had a $24 billion market cap. It trades at nearly 194X expected 2015 earnings. On Wednesday, many investors doubted Twitter would enjoy such high multiples for long. About 49% of users anticipated further declines, according to StockTwits’ analytics. The stock has already declined nearly 50% from its 52-week high.

$TWTR The results from the ER aren't really surprising. Growth is anemic and the monetization strategy they have in place in unworkable.

— Rich (@Fickle) Apr. 30 at 06:22 AM

The bears doubt Twitter will reach the billion user tipping point that Facebook CEO Mark Zuckerberg singled out as the level when a Web service goes from a fun thing people do to an incredibly useful utility that warrants a $20-plus billion valuation. According to Zuckerberg, a service with a billion users is so pervasive that it can monetize without fear of user flight. Facebook itself has more than a billion mobile users, according to its first quarter earnings report, released earlier this month.

If Twitter doesn’t hit the billion tipping point, some investors fear it could become a niche network. The worst fear is that it could go the way of, say, MySpace—the once dominant social network that is now struggling to reinvent itself.

Most bullish investors see little chance of that happening. They note that Facebook fell below its IPO price during its first year as a public company on user growth concerns. However it rebounded sharply after it accelerated mobile user growth and revenues. Facebook now trades at $58, nearly 53% above its $38 IPO price

$TWTR is experimenting the same "hate moment" as $FB did. Eventually it will climb back at the due moment. Keep Calm & Stay Long.

— Alessandro Ruocco (@pelias) Apr. 30 at 08:12 AM

Other investors are not so sure that Twitter can become a billion-user utility. And those concerns are casting doubt on the valuations of other social media companies that trade at high, double digit multiples, such as LinkedIn, $LNKD.

$TWTR in the process of causing a MOMO dump tot ake out any gains from yest $YELP $FB $LNKD

— LMF (@mytfine) Apr. 30 at 08:03 AM

LinkedIn and Yelp, $YELP, each opened down about a percent. Facebook also edged lower Wednesday.


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