Twitter’s Business Is Flying, Is Low Growth Really a Problem?

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Twitter (NASDAQ:TWTR) failed to impress traders on Tuesday evening when the social media company, which launched its IPO last November, reported first-quarter earnings. Shares closed the regular trading session up 4.64 percent at $42.62 but are down 12.79 percent in pre-market trading. The catalyst? Lower-than-expected user growth — and this, despite a beat on the top and bottom line.

Twitter reported a GAAP loss of $132.36 million, or 23 cents per share, in the first quarter of 2014, compared to $27 million, or 21 cents per share, in the year-ago period. The unadjusted figure includes $126 million in stock-based compensation expenses. Adjusted net income was reported at $183,000, or zero cents per share, which compares against an adjusted loss of $11 million, or 8 cents per share, in the year-ago period. The mean analyst estimate was an adjusted loss of 3 cents per share.

Revenue of $250 million, up 119 percent on the year, beat the mean analyst estimate of $241 million. Advertising revenue clocked in at $226, up 125 percent on the year and accounting for 90.4 percent of total revenues. Mobile ad revenue accounted for 80 percent of total ad revenue.

All this was the good news. Where concerns over mobile monetization plagued Facebook (NASDAQ:FB) after its IPO, the mobile revenue is a nonissue for Twitter. Perhaps looking at Facebook’s post-IPO snafu and learning from the company’s trial by fire, Twitter hit the market with a strong mobile ad product in hand. Moreover, increased strength at the top and bottom line demonstrate that Twitter’s core business machine is running smoothly, and moving the business forward.

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