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Published On: Wed, Jul 30th, 2014

Twitter shares rise by 35 percent on earnings, dispelling concerns

Twitter shares have risen 35 percent following a quarter of user growth slowdown, more steady growth is needed to attract investors.

Twitter shares increased by 35 percent

Twitter Inc managed to cope with the first quarter slowdown of users growth, by introducing tweaks and services related to the Mondial 2014, assuaging concerns it had reached its peak. Twitter shares increased by 35 percent Tuesday, following a rise in monthly active users by 24 percent, exceeding expectations. That was the most massive gain in one day bringing $7 billion to the company’s market value.

In February user growth was remarkably low, which surprised investors. Before the soaring late Tuesday, Twitter has suffered around 40 percent loss of its market value since the beginning of the year. Now the company has exceeded all metric targets. According to analysts, what it needs is several quarters showing steady growth, so that investors start backing the stock again. Now they are eager to see how Twitter will fare in the next quarter.

Although Twitter users number 271 million, that is still less compared to its rival Facebook, with 1.3 billion users. Twitter format has gained popularity, and the 2014 World Cup played a part for its boost. As the company’s CEO Dick Costolo said to analysts on Tuesday at a conference call, the Mondial enabled existing Twitter users to hang out more on the media, but he did not believe the major sporting event contributed to the attraction of new users during the quarter.

For the second quarter the forecasted revenue is between $330 million and $340 million. Twitter shares soared to $51.20 in extended trading, up from the $38.59 close on the New York Stock Exchange.

There has been user growth decline since Twitter went public. But its valuation remains at roughly 200 times its earnings, as bullish investors think it can reach the scope of Facebook. Lending more support to the optimistic projections and expectations, Antonio Noto, incoming Finance Chief, asserted that it is his strong belief Twitter can develop as the media with the largest audience on a global scale.

At the Tuesday conference call, the company’s executives remarked that the Twitter reach of service exceeds the quoted 271 million users. They explained their belief by reminding there are millions of online users who visit the Twitter site, or they come across Twitter content on the Internet without being actually logged in.

The peak reached by Twitter was $46 billion capitalization on $665 million of revenue in 2013, which meant it was among the priciest stocks on a global scale. In the past months the platform allotted more space to photographs for more vibrant interface, simplified signup, and allowed ads of mobile apps to boost revenues. The quarterly revenue soared 124 percent to $312 million, and the non-GAAP net income was $14.6 million, or 2 cents per share, reversing last year’s loss.


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