NEW YORK (TheStreet) --Twitter (TWTR) stock is declining by 6.21% to $14.05 in pre-market trading on Thursday, following the release of the company's 2015 fourth quarter financial results yesterday afternoon.
The social network added no new users for the first period since it went public, exacerbating investors' concerns about its growth potential.
Twitter detailed a turnaround plan that includes focusing on live streaming video, improving products and updating its timeline, and hiring quality board members and engineers. However, the company conceded that the turnaround will take time.
Twitter expects that 2016 first quarter revenue will range between $595 million and $610 million, below analysts' estimates for $629.25 million.
"The platform's overall growth is underwhelming," Randy Guisto, vice president and lead analyst with Outsell, a research and advisory firm, told Reuters. "They have plateaued and can't look to India or China as those markets are dominated by messaging apps like WhatsApp, as well as Apple and Google's proprietary, pre-installed platforms."
In all, Twitter reported fourth quarter adjusted earnings of 16 cents per share on revenue of $710.47 million, higher than analysts' projections for earnings of 12 cents per share on $709.94 million in revenue.
Following the company's earnings, Pacific Crest downgraded the stock to "sector weight" from "overweight," noting that Twitter "has set a new historical precedent in failing to inspire any improvement in investor sentiment with a new vision."
Insight from TheStreet Research Team:
Jim Cramer, Portfolio Manager of Action Alerts PLUS and Jack Mohr, Director of Research, mentioned Twitter in a recent post. Here is a snippet of what Jim Cramer and Jack Mohr had to say about the stock:
The headline beat is more misleading than anything else, as 4Q total monthly active users (MAUs) came in flat sequentially at 320 million (which was 9% growth year over year). More importantly, MAUs excluding SMS Fast Followers (users who can only use the service on a low-speed, text-messaging basis; this is considered the more telling metric) declined by 2 million users to 305 million (up 6% year over year) vs. consensus estimates for 309 million.
That being said, we do give management a smidgen of credit for specifically addressing the issue in their shareholder letter, noting that the platform has already seen increases in MAUs excluding SMS Fast Followers at the end of January to 3Q levels (and we note that 4Q is typically the company's worst quarter seasonally).
The bottom line: The market cares about user growth and Twitter hasn't proven its ability to deliver. We reiterate that the stock will remain pressured until this changes. That being said, we continue to recognize the long-term potential the platform possesses -- even with stagnant user growth in this past quarter, the company was still able to grow revenues roughly 50% year over year, demonstrating that there is still a business to be made even if user growth is slowing.
-Jim Cramer and Jack Mohr "Twitter's Results Are a Letdown" Originally Published on 2/11/2016 on Real Money Pro.
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Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.
Twitter's weaknesses include a generally disappointing historical performance in the stock itself.
You can view the full analysis from the report here: TWTR
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.