Coverage: Twitter drops after earnings leaked on Twitter

Twitter got a taste of what it’s like to be a celebrity on its own platform after the company’s first quarter results were leaked – in a tweet. Serelity, a financial information site, reported about an hour before the company was scheduled to release results that it would miss expectations, sending the stock down 18 percent.

Bloomberg’s Sarah Frier had this story about the company’s results:

Twitter Inc. posted first-quarter revenue that fell short of estimates and cut its sales forecast as the company struggles to attract more users and advertisers. The stock fell 18 percent, fueled by the early release of results.

Revenue is a new concern for investors, who have spent the past year criticizing slowing user growth. Sales will be $470 million to $485 million in the second quarter, Twitter said in a statement Tuesday, missing analysts’ average projection for $538.1 million. Twitter cut full-year revenue guidance to $2.17 billion to $2.27 billion, from the previous range of $2.3 billion to $2.35 billion.

“It calls into question why they didn’t see this coming,” said Victor Anthony, an analyst at Axiom Capital Management, who has a buy rating on Twitter’s stock. “I don’t think anyone ever questioned their ability to generate revenues.”

The number of monthly active members rose 18 percent to 302 million in the latest quarter compared with 20 percent in the prior period.

Jessica Guynn wrote for USA Today that Selerity claims to have gotten the numbers from Twitter’s own website:

Trading in Twitter shares was halted after its quarterly results leaked before the market closed. Research firm Selerity reported the company’s results in a series of tweets.

The San Francisco social media company said it was investigating the source of the leak and released its earnings early.

“We asked @nyse to halt trading once we discovered our Q1 earnings numbers had leaked, and published our results as soon as possible,” Twitter said in a tweet.

Selerity said it got the results from Twitter’s investor relations website.

“No leak. No hack,” the firm said in a tweet.

The Wall Street Journal story by Angela Chen and Yoree Koh said that new products weren’t performing as well as the company expected:

Twitter Chief Executive Dick Costolo said in the company’s news release, “Revenue growth fell slightly short of our expectations due to lower-than-expected contribution from some of our newer direct response products.”

Some of the new products Twitter has introduced include video functionality, the “while you away” recap feature, instant timelines and group direct messaging.

For the current second quarter, the company expects revenue between $470 million to $485 million, below analyst estimates of $538 million. For the full year, the company expects sales of $2.17 billion to $2.27 billion, again below analyst estimates of $2.37 billion.

Vindu Goel wrote for The New York Times that investors were shocked by the results and that it could hold the CEO accountable:

The company’s slowing revenue growth shocked investors, who have counted on Twitter’s strong performance there to offset the trouble that the microblogging service has had in attracting new users.

“User growth doesn’t appear to be notably improving and now monetization is failing to live up to expectations,” said Richard Greenfield, an analyst with BTIG Research. “That’s why the stock is selling off so hard. The question is, how much of this is Twitter’s own missteps versus how much of this is peers such as Facebook, Instagram and Snapchat eating into their advertising?”

The poor performance may renew calls for the resignation of Twitter’s chief executive, Dick Costolo, who has been under fire by some investors ever since the company’s initial public offering in the fall of 2013.

“Management will again have to address credibility concerns,” Mark Mahaney, an analyst with RBC Capital Markets, wrote in a note to investors shortly after the results came out. “We are increasingly concerned that Twitter’s lack of real-time commercial intent (à la Google) or detailed, authenticated profiles (à la Facebook) will at some point materially limit TWTR’s ad growth potential.” TWTR is the company’s stock symbol.

The CNN Money by Paul R. La Monica and Hope King that some of the drop could likely be attributed to internal management struggles.

Twitter has always faced competition from Google (GOOG) and Facebook (FB, Tech30), more mature digital media companies, but over the past year, it has also struggled internally.

There have been several high profile management changes, which have caused some analysts to wonder if CEO Dick Costolo is the right person for the job.

Compared to other social apps like Snapchat, which — after only a few years — already has almost 200 million users by some estimates, concerns over Twitter’s user-growth deceleration have been constant. Twitter now has 302 million active monthly users, but growth has been drastically slowing for the past few quarters.

The company has launched multiple changes to help attract new users, and retain existing users, which sometimes rubbed people the wrong way.

On top of all this, there are still questions about how much ad revenue Twitter is effectively squeezing from its user base. Twitter only has 60,000 advertisers on its platform and compared to Facebook, Twitter serves fewer ads.

Twitter needs to figure out which goals are most important to address first: growing users and serving advertisers.

The drop could be a signal that users are shifting away from the platform to other means of communication. One thing is clear, investors are done giving them the benefit of the doubt if Tuesday’s stock moves are any indication. CEO Dick Costolo is likely feeling the pressure after the market’s reaction.