2014 has not been kind to Twitter (NYSE: TWTR). Since January, the stock has been tumbling down, down, down. In its quarterly report on Tuesday, the company posted a bigger loss and a shorter active user gain than was expected.
So, what’s going on? It’s more popular than ever, right?
The company reported a first-quarter loss of $132.36 million, or 23 cents a share, compared with a $27.03 million, or 21 cents per share, for Q1 of 2013, according to MarketWatch. At the same time, revenue jumped to $250.49 million from $114.34 million.
Revenue isn’t the problem. What the social network needs to do is find a way to add users at a faster rate. You’re probably like me, and have a Twitter account that just sits there inactive. How are they going to get people like us to actively join in? And how are they going to get the rest to sign up? That’s where the struggle lies.
After Tuesday’s report, shares fell another 10 percent. By Wednesday afternoon, they were down more than 10 percent, with no end in sight.
The one golden nugget Twitter holds is in its advertising. The company said ad revenues shot up 125 percent.
Some 80 percent of this came from its mobile network, and data licensing and other revenue made up the rest. In all, it enjoyed a year-over-year increase of roughly 75 percent.
Yet the stock suffers, and at this rate could see its worst week ever.
Twitter reported average monthly active users of 255 million as of the end of March and analysts put that number right around 257 million for April, so there are signs of improvement there.
Performance
Since February, when Twitter published its first results as a public company, it has been in a rocky state, posting a net loss of $511 million for the fourth quarter of 2013. Even before that, the stock just never did really catch fire.
But the company has been undeterred. It’s been snatching up social TV companies, data analytics, and has plans to roll out 15 new types of advertising.
It’s been working to make the network more intuitive for new users and give profile pages a familiar face that resembles Facebook. It’s also been testing out a new signup experience to improve the user initiation process.
And contests…I have a friend who says she has constantly been winning free stuff on Twitter.
Still, even at the high end of analyst estimates, Twitter sits well behind the eight ball and is nowhere near its expected growth.
Twitter expected to hit 400 million monthly active users by the end of 2013, according to Mashable.
Despite its major jump in revenues, the company is still not expected to be profitable, with a general consensus that Twitter will report a net loss of $0.03 per share.
Its stock topped out back in December of last year when it hit $70 a share, right after the company went public, but it’s been a downward slide ever since, and this week everything has been compounded.
To Buy or Not to Buy
Still, some analysts see the upside. You can’t argue with that kind of increase in revenues and advertising, but user growth remains weak, and people simply aren’t signing up like we all thought.
Naturally, the stock suffers.
Maybe we all just expect too much out of Twitter. When it didn’t deliver, down went shares.
It’s important to note that it did add more users in Q1 of this year than in Q4 of last year, indicating that a drive for an increase in user growth is there.
Revenues will in all likelihood continue to soar, especially as Twitter adds to its already stellar advertising plan. Most analysts are putting the mark for the next quarter a little over $270 million.
As the old adage goes; sometimes it gets worse before it gets better.
It may be catching on slowly to this whole profitability thing, but our whole world runs through Twitter, and before you know it, you’re going to have to be on it, whether you like it or not, at least if you want to know what’s going on in the world.
The question now is: how far down will it go?
