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Twitter: The Bears Sweat the Details

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Twitter is taking a beating after reporting fourth-quarter earnings.

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Twitter (NYSE:TWTR) is taking an absolute beating post-earnings, mostly because of one measly stat: Its quarter-over-quarter growth in monthly active users fell to just 4% from 6% in Q3.

Incidentally, Facebook's (NASDAQ:FB) quarter-over-quarter growth fell to 4% in the second quarter of 2013.

But at that time, Facebook had over 1.1 billion users.

As of the fourth quarter reported yesterday, Twitter was at the 241-million-user mark, and concerns are growing about the company's ability to grow that number:



But despite the company's challenges in its user population, Twitter saw a drastic increase in monetization, as revenues grew 44% quarter-over-quarter to $243 million, smashing the $218 million consensus.

So let's think about the company's full-year revenue guidance of $1.15 -1.2 billion.

On the conference call, CEO Dick Costolo laid out steps the company is taking to improve the new user experience, including revamping the sign-up process to make it more beginner-friendly (Phil Pearlman of Yahoo Finance had some interesting ideas here), better integration of visual media, and a bigger focus on Twitter as a daily conversational tool.

However, the company is keeping expectations low.

On the conference call, Twitter CFO Mike Gutpa said that in terms of 2014 guidance, "we are not assuming any significant inflection point in the user growth curve."

If we assume sequential user growth of 4% throughout 2014, that annualizes out to a 17% increase in users, or 282 million.

The midpoint of the aforementioned guidance range assumes revenue growth of 77%.

That means, in terms of guidance, Twitter is forecasting a huge, ongoing improvement in its monetization rates, which seems achievable given how aggressively advertisers are pushing money toward social initiatives.

However, as a stock with a valuation that's still insane after trading down 31% from its all-time high at $74.73, all the details -- including that user growth number -- matter.

The party's over. The fight begins.

See Also:

The Woz Thinks Apple Inc. Should Make an Android Phone

Apple Inc. Files Its Most Ironic Patent Yet

Microsoft's Satya Nadella Does Not Need Our Advice

Twitter: @MichaelComeau

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Position in TWTR
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