Saturday, May 31, 2014

Twitter Tweeting Troubling Trends

This article was originally published by Seeking Alpha on May 28, 2014

By Sarfaraz A. Khan. Research Asst. Gohar Yousuf

Twitter’s growth rates for monthly active users could come to a standstill. Data on user engagement isn't encouraging. Twitter's shares might remain under pressure until the company figures out a way to improve its two key metrics.

Twitter (TWTR) is in trouble.

Last month, the company reported its first quarter results in which its revenues increased by 119.1% from the same quarter last year to $250.5 million.

During the conference call, Twitter's head Richard Costolo credited "increased engagement and user growth" for the company's impressive top line growth. A deeper look inside the company's quarterly filing, however, reveals some alarming trends.

Twitter is still adding millions of new users in each quarter but its growth is slowing down. In the first quarter of 2014, Twitter reported a 25% year-over-year increase in monthly active users to 255 million, a far cry from a growth of 102.9% two years ago and 47.8% one year ago.

If Twitter's monthly active user growth rate continues to drop at this pace, then this key metric could drop to zero before the end of this year. This is shown below in the red dotted line …. Read full article at Seeking Alpha