Twitter assuages growth concerns for now as shares soar 35 percent

Tue Jul 29, 2014 6:46pm EDT
 
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By Edwin Chan

SAN FRANCISCO (Reuters) - Twitter Inc (TWTR.N: Quote) halted a slowdown in user-growth in the second quarter with the help of product tweaks and services built around the summer's World Cup, assuaging concerns for now that the online messaging service had peaked.

Shares of the company soared 35 percent on Tuesday after it reported monthly active users had risen a better-than-expected 24 percent, chalking up what would be its largest gain in a single day and adding almost $7 billion to its market value.

Twitter, which has battled to reverse a steady decline in its once-heady pace of growth, surpassed targets for virtually every metric Wall Street scrutinizes. Expectations had subsided ever since the company stunned investors in February with disappointingly low user growth.

Before Tuesday's after-hours surge, Twitter had lost about 40 percent of its market value since the start of 2014. The company now needs to demonstrate several quarters of respectable growth before investors can again back the 10-year-old company's growth story, analysts said.

"The expectations going in had become quite low," said Sterne Agee analyst Arvind Bhatia. "Even in the U.S. their performance was good. For now, that will put to rest some of the concerns about U.S. growth."

"One would still have to say that the jury is still out," Bhatia said. "You have to look maybe at what happens in the next quarter and see if they can continue to have upside on the user growth."

Twitter saw users increase to 271 million, still dwarfed by rival Facebook Inc's (FB.O: Quote) 1.3 billion. Wall Street analysts had been expecting a pace of growth closer to 21 percent.

Timeline views, a measure of the engagement of its users, also exceeded expectations with a 15 percent increase, far outpacing the roughly 8 percent expected.   Continued...

 
The Twitter logo is displayed on the floor of the New York Stock Exchange, November 8, 2013. REUTERS/Brendan McDermid