Twitter Stock Takes a Dive After Q4 2013 Earnings Announcement

v65oai7fxn47qv9nectxTwitter results are in for their first quarter as a publicly traded company, and there was a lot of good news brought down by one stark bit of bad news that has caused a momentary free fall in Twitter’s stock price.

Twitter took in $243 million in revenue for Q4 2013, which handily beat estimates of about $218 million. With expenses at $226 million, believe it or not, Twitter actually made a profit last quarter, at $.02 per share. Their 2013 net loss was $645 million because of stock compensation, but that’s a post-IPO phenomenon that won’t have such a huge effect on financial numbers going forward. So, all aboard the gravy train, right?

Guess not. Twitter’s stock is down over 15 percent today, because of a less impressive number – 241 million. That’s Twitter’s monthly active user count, compared to 232 million in Q3 2013. That 9 million user increase, by percentages, is the weakest user growth Twitter has seen since it began keeping track of monthly active user growth. That’s feeding into fears that Twitter’s user base might be shying away because of ad implementation, or that Twitter is losing its ability to attract new users.

But, there’s some reason to think that new pessimism is misguided. The fact that Twitter made a profit this quarter with weak user growth implies that Twitter is simply making more money per user. That seems to be the case – even though the company announced that the average price charged to advertisers per ad dropped, user interaction with ads increased significantly. The company thinks that’s a result of better targeted ad mechanisms that they started implementing in Q4 2013.

That said, a slowdown in user growth would indicate that Twitter’s enormous valuation might be a little too optimistic. That and, by Twitter’s own admission, Q4 2013 ad revenue got a significant bump from the holiday season. As a result, Q1 forecasts are being put at $230-$240 million, which would be flat compared to Q4 2013.

One last surprise was that Twitter is forecasting revenues of $1.2 billion for all of 2014 – about double most Wall Street estimates. As usual, Twitter is shrouded in optimism.

Oh, and for the users, what can you expect in 2014? Well, you can expect ads. More visual ads. Video ads. Targeted ads. Ads that bring value to the user. Ads directly targeting certain TV audiences. Alright, you can also expect more content to be organized by topic, and better tools for having conversations on Twitter, too. But seriously, ads.

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