Twitter Inc (NYSE:TWTR) shares tumbled as much as 24.16% to $50.03 on February 6 after the company reported its fourth quarter results after the market close on February 5. It wiped out more than $8 billion from the company’s market value. That’s quite shocking because the microblogging company’s results exceeded Wall Street expectations. Analysts were expecting Twitter to lose 2 cents a share with $216.86 million in revenues during the December quarter. But the company posted a non-GAAP profit of 2 cents on $242.7 million revenues.
Can Twitter ever become like Facebook?
A week earlier, when Facebook Inc (NASDAQ:FB) posted better-than-expected fourth quarter results, its shares went up by more than 10%. And investors assumed that other social media companies will also benefit immensely from mobile. As a result, Twitter Inc (NYSE:TWTR) shares also went up more than 7% on January 30. Investors were partially right in their assumption, says Vauhini Vara of The New Yorker. The San Francisco-based company beat analysts’ expectations. Twitter exceeded the consensus by effectively monetizing its user base. Even when it comes to user growth, it performed exactly as Facebook had. Then, why is its stock sinking?
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Investors are concerned that Twitter Inc (NYSE:TWTR)’s monthly active users (MAUs) grew only a little. At the end of December 2013, the company had 241 million MAUs, indicating a 30% YoY and a meager 4% QoQ growth. In contrast, Facebook Inc (NASDAQ:FB)’s user base reached 1.2 billion in December 2013, showing only 3% growth. The percentage growth rate was similar. But it’s simple math: 10% of 100 and 10% of 1,000 are entirely different numbers.
Facebook Inc (NASDAQ:FB) is a large and established company. More than 17% of the global population is on Facebook, which is impressive because only 39% of the Earth’s population has access to the Internet. In contrast, only 3% of the population is on Twitter Inc (NYSE:TWTR). It shows that Twitter still has a lot more room to grow that Facebook, but it hasn’t yet. That’s not the only thing. When Twitter came into existence in 2006, people didn’t know what to do with it. Why would a civilian share 140-character messages with the public? Though celebrities and high-profile figures actively use the microblogging site, a large number of common people are still puzzled by it.
Twitter to introduce new features
During Q4 earnings conference call, Twitter Inc (NYSE:TWTR) CEO Dick Costolo acknowledged that regular people still find it difficult to use Twitter. He said the company would make some changes over the next year to make the microblogging site easier to use. People will be able to find their existing friends and have one-to-one conversations on the site. Apart from this, Costolo didn’t provide much clarity. Shares continued to tumble after the conference call ended.
Twitter Inc (NYSE:TWTR) shares ticked up 0.74% to $50.40 in pre-market trading Friday.