(Adds Twitter executives' comments, details on quarter)
By Edwin Chan
SAN FRANCISCO, July 29 Twitter Inc
halted a slowdown in user-growth in the second quarter with the
help of product tweaks and services built around the summer's
World Cup, assuaging concerns for now that the online messaging
service had peaked.
Shares of the company soared 35 percent on Tuesday after it
reported monthly active users had risen a better-than-expected
24 percent, chalking up what would be its largest gain in a
single day and adding almost $7 billion to its market value.
Twitter, which has battled to reverse a steady decline in
its once-heady pace of growth, surpassed targets for virtually
every metric Wall Street scrutinizes. Expectations had subsided
ever since the company stunned investors in February with
disappointingly low user growth.
Before Tuesday's after-hours surge, Twitter had lost about
40 percent of its market value since the start of 2014. The
company now needs to demonstrate several quarters of respectable
growth before investors can again back the 10-year-old company's
growth story, analysts said.
"The expectations going in had become quite low," said
Sterne Agee analyst Arvind Bhatia. "Even in the U.S. their
performance was good. For now, that will put to rest some of the
concerns about U.S. growth."
"One would still have to say that the jury is still out,"
Bhatia said. "You have to look maybe at what happens in the next
quarter and see if they can continue to have upside on the user
Twitter saw users increase to 271 million, still dwarfed by
rival Facebook Inc's 1.3 billion. Wall Street analysts
had been expecting a pace of growth closer to 21 percent.
Timeline views, a measure of the engagement of its users,
also exceeded expectations with a 15 percent increase, far
outpacing the roughly 8 percent expected.
Twitter, whose rapid-fire format has proven popular as a
companion to major global events, may have enjoyed a boost from
the World Cup. The world's most popular sporting event peaked
with the finals in July.
Chief Executive Dick Costolo said in a conference call with
analysts on Tuesday that the football tournament led existing
users to spend more time on Twitter but did not contribute to
the rise in new users during the quarter.
For the current quarter, Twitter is forecasting revenue of
$330 million to $340 million, outpacing forecasts for around
$323.7 million, according to analysts polled by Thomson Reuters
Its shares jumped to $51.20 in extended trading, from a
close of $38.59 on the New York Stock Exchange.
BRIDGE TOO FAR
User growth has stagnated since Twitter went public to much
fanfare in November. Yet it remains valued at almost 200 times
earnings, based on bullish investors' belief it can eventually
transform itself into an Internet platform on the same scale as
Incoming Finance Chief Anthony Noto set expectations high on
Tuesday, telling analysts that he believed Twitter can build the
"largest audience in the world."
Twitter executives noted several times on the call that the
service's reach is greater than its 271 million monthly users,
citing hundreds of millions of other people who visit the
website or are exposed to Twitter content without being logged
in to the service.
Some investors argue its reported user numbers do not fully
reflect engagement, particularly with media viewers. Others say
its inherently complex format deters wider adoption.
At its peak, Twitter enjoyed a $46 billion capitalization on
$665 million of revenue in 2013, making it at the time one of
the world's priciest stocks.
But in past few months, Twitter has granted more prominent
placement to photographs to liven up its interface, simplified
the sign-up process, and allowed ads touting mobile-app
installations to drive up revenue.
It reported a 124 percent jump in quarterly revenue to $312
million, beating expectations for $283.1 million. It posted
non-GAAP net income of $14.6 million or 2 cents a share,
reversing a loss of $16.4 million or 12 cents a share a year
(Reporting by Edwin Chan; Editing by Leslie Adler, Bernard Orr)