Twitter share price plummets as it fails to live up to World Cup hype

Twitter shares dropped in value by as much as eight per cent in after hours trading, highlighting concerns about the micro-blogging site's user growth.

 

In its earnings for the third quarter, it reported 284m monthly active users – a 23 per cent increase from the equivalent period in 2013 but just a five per cent increase from the second quarter of 2014.

 

This was enough to discourage investors, with shares falling by as much as 8 per cent to $44.9 despite the company recording its first profit. 

 

Earnings per share went up by one per cent, which matched analysts' estimates and would have assuaged that it would never make a profit – one of the main investor concerns when it first  listed.

 

Additionally, revenue for the third quarter was $361m, beating Wall Street estimates of $351. 

 

"The results were in line but Twitter is priced to be better than in line," Rosenblatt Securities analyst Martin Pyykkonen said.

 

The latest figures have raised concerns about Twitter's slowing growth and its potential to reach the status and value of Facebook. 

 

User growth in the second quarter was 16m, but this was propped up considerably by the World Cup. The football event ended a couple of weeks into the quarter on 13 July, and investors would have been eagerly waiting for the latest figure.

 

"Investors skeptical of the sustainability of the pace of user growth are likely to focus on third quarter user metrics," said Arvind Bhatia, an analyst at Sterne Agee. 

 

"Recall, second quarter user metrics were much stronger than expected.. and the subsequent debate has been whether this metric was boosted primarily by the FIFA World Cup or the impact of the product changes."