Twitter's growth seen hinging on luring advertisers

Wed Apr 29, 2015 10:11am EDT
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(Reuters) - Twitter Inc's (TWTR.N: Quote) slowing revenue and user growth has raised further doubts about its ability to entice advertisers to spend more on its platform - at least in the near term.

Shares of the micro-blogging website operator, which warned on Tuesday that user growth was off to a slow start in April, fell 5.2 percent to $40.07 in early trading on Wednesday.

Twitter's market value fell by a fifth, or about $5 billion, on Tuesday after its disappointing first-quarter results were released in error an hour ahead of schedule.

At least 15 brokerages cut their price targets on the stock.

"...Simply put, advertisers aren't willing to bid up or spend as much with TWTR as expected," RBC analysts said in a research note, cutting their price target to $$47 from $54.

Advertising has been seen as a growth driver for Twitter, but the RBC analysts said the company appears to have "hit an ROI (return on investment) wall with its advertisers."

Twitter's ad revenue per monthly average user has now decelerated for three consecutive quarters, and its outlook implied a further slowdown in the second quarter.

Analysts had expected the company's new advertising products, particularly its app install ads, to start driving growth in the latest quarter.

That didn't happen as much as expected.   Continued...

The Twitter logo is shown on an LCD screen in front of a displayed stock graph in central Bosnian town of Zenica, Bosnia and Herzegovina, in this April 29, 2015 photo illustration. REUTERS/Dado Ruvic