Twitter Inc (TWTR) released their inaugural earnings report after the bell on Feb 5, with losses coming in at half a billion dollars, or twice analyst expectations. Investors responded immediately with a massive sell-off, causing the company to bleed out some $5 billion in value in matter of minutes.
Twitter had experienced a run-up the last three months leading up to its first quarterly statement, gaining over 150 percent in value since its November IPO. As is the problem with many a red-hot tech property, Twitter’s valuation had ceased to be tied to any conceivable fundamental metric, causing what many had argued, and what has appeared to be, a bubble. The only question now is how large that bubble turns out to have been.
Twitter’s stock price had long been built on “the promise of future business,” as Rapid Ratings CEO James Gallert has asserted. With the substantial loss, promises of wild growth have been tempered significantly, possibly signaling the beginning of a stock loss comparable to Facebook in their earliest days on the market.
While Twitter beat revenue estimates by 12 percent, and experienced a 30 percent surge in monthly users, the earnings loss was far too much to offset any positive news.
As opposed to Facebook Inc. (FB) , the company has not had trouble maintaining a youthful audience and a healthy percentage of ad revenue derived from mobile, both hallmarks of a successful social media company. These two advantages energized social media investors, but perhaps also contributed to Twitter’s price climbing to unsustainable levels.
Twitter reported a net loss of $511.5 million, or ($1.41) per share, versus the net loss of $8.7 million, or ($0.07) a share from the same period a year ago. Revenue for the quarter was $243 million, as compared to $112 million from the same quarter the previous year. Analysts were expecting a loss of $253.5 million, or ($0.02) a share on revenues of $218.1 million.
After dropping as much as 16 percent after hours, Twitter’s stock bounced back slightly, and thirty minutes after the bell was down 12.04 percent to hit $57.83 a share.