Twitter, Inc. (NYSE: TWTR) shares dropped more than 10 percent on Thursday after the company reported a disappointing number of monthly active users in its second quarter earnings release.
The social media platform had 328 million monthly active users, demonstrating that there has been no growth since the previous quarter. Analysts had been expecting an average about 328.8 million users, according to Reuters.
"You have zero user growth versus Facebook reporting 70 million new users [after the bell Wednesday]," Aegis Capital internet analyst Victor Anthony said Thursday on CNBC's "Squawk Box." "It's not a recipe for a stock you want to buy."
Twitter beat analysts’ expectations on EPS (non-GAAP) at 12 cents per share, compared to a predicted 5 cents per share. The company posted revenue of $574 million against the expected $536.7 million by Wall Street. However, the quarterly GAAP net loss reported was $116 million, representing a GAAP diluted EPS of 16 cents.
Shares surged more than 40 percent after the corporation had increased its monthly active users by 9 million than expected in the first quarter. Investors are now concerned with user growth, as rival Facebook currently has 2 billion monthly active users.
Twitter execs remain confident as the company's chief operating officer, Anthony Noto, said on a call with investors, "While we still have a lot of work to do for revenue growth to get it to track audience growth, the improvements in revenue growth reflect the progress executing against our top revenue-generating products in the second quarter as well as strengthening business fundamentals.”
Digital trends analysis firm eMarketer projects Twitter's advertising revenue will grow 1.6 percent this year, to $2.28 billion, with 90 percent of that coming from the mobile market. Despite the focus on mobile, eMarketer believes the company's share of global market advertising will shrink to 1.5 percent.
Shares of Twitter stand at $17.17, well below its IPO price of $26.