Twitter stock nosedives after mediocre earnings report

By Barry Eitel

SAN FRANCISCO (AA) – Shares of Twitter plummeted 13 percent Wednesday after the company released a lackluster quarterly earnings report the day before, which exposed user growth and revenue are both sluggish.

The company’s stock dropped to around $16 per share, well below the $36.67 it was valued at about a year ago. Since July 2015, shares has slumped significantly. Its current market capitalization is $11.26 billion, well below its initial public offering (IPO) valuation of $18 billion when the company went public in 2013.

After markets closed Tuesday, Twitter released its earnings report for the second fiscal quarter of 2016. The report revealed that it counted 313 million monthly active users, just a 3 percent increase from a year ago and less than 1 percent compared to the previous quarter.

The company claimed it had $602 million in revenue for the quarter, up from last year’s second quarter by 20 percent but lower than analyst expectations of $606.8 million. For the quarter, the company posted a net loss of $107 million.

“Our brand business remains strong in absolute terms, but there are some new challenges that we’re now tackling head-on,” the microblogging service tweeted Tuesday evening.

Some analysts are heartened by Twitter’s recent deals with the National Football League and the Olympics aimed at distributing content – and advertising -- through the platform live, as well as recent acquisitions like the purchase in June of Magic Pony, a video software start-up.

Still, in his investor note for financial analyst firm Cantor Fitzgerald published Wednesday, Youssef Squali was cautious, downgrading his rating on Twitter stock from “buy” to “hold.”

"It's become more apparent to us that these initiatives may take longer to re-accelerate growth," he wrote.

More unhappy news is likely to follow Twitter through 2016. The company said in the report that it expects revenue for the third quarter to be between $590 million and $610 million – the midpoint of that range is lower than the $602 million of revenue earned last quarter.