Twitter earnings are getting to be a broken record as the micro-blogging platform again disappointed on user growth in last night’s report. Today Twitter shares declined as much as 13.29% to $31.70 per share in the wake of that report.

Twitter Inc Plunges Post-Earnings But Earns PT Increase

Twitter shows solid business fundamentals

Twitter’s share price decline is interesting in light of the fact that the company smashed earnings estimates, posting 7 cents per share in earnings compared to the estimate of 4 cents per share. Twitter also beat in the area of ad revenue, posting a 63% growth rate, coming in slightly ahead of estimates. It should be noted though that approximately 4% of Twitter’s ad revenue came from the recent TellApart acquisition.

Wall Street remains concerned, however, because of management’s dismal forecast for user growth, combined with the second quarter’s weak growth numbers. Analyst Brian Wieser of Pivotal Research thinks investors are too focused on user growth, instead emphasizing the company’s business fundamentals.

No surprise in user growth

He notes that investors should expect weak user growth from Twitter at this point and continues to believe that the micro-blogging platform can change things around. For example, he pointed out that Twitter’s churn rate among its 65 million U.S. users is stable. Also the ratio of daily to monthly users has increased, indicating that monthly users are starting to use the platform more often and engaging with it more.

Twitter grew its revenue 63% year over year to $502 million, beating management’s guidance of between $470 million and $485 million. That revenue beat even came with a negative impact of 7% from currency headwinds.

Twitter’s churn rate the key

Because of the solid business fundamentals, Wieser upped his price target on Twitter slightly from $41 to $42 per share and maintained his Buy rating on the stock. He hasn’t changed his view on the company much since its initial public offering, seeing it as the third or fourth player in “importance in digital advertising.” The first two positions are of course held by Google and Facebook. He sees Twitter as tied with the Verizon – AOL partnership and Yahoo in fifth place behind Twitter.

He believes the bearishness over Twitter’s user growth is “unwarranted,” particularly because the company’s churn rate has remained stable. If that changes, however, his view on Twitter may change. The analyst also thinks Twitter will improve user growth by continuing to improve its products. He also said the traction Twitter is gaining with advertisers, combined with the new ad products, mean the company is moving in the right direction.