twitter-ipoTwitter stock fell by more than 10% overnight to $38.05, below its post-initial public offering low of $38.80 on November 25. The San Francisco-based company said its 255 million monthly users, on average, appeared to check the service less frequently than a year ago.

The results revealed slowing momentum at a company that exuberant investors just six months ago had argued could one day match Facebook Inc’s scale. At its peak in December, Twitter enjoyed a $46 billion market capitalization on just $665 million of revenue in 2013, making it one of the world’s priciest stocks.

In February, Twitter reported its first earnings results as a public company. Twitter disclosed that user growth had fallen to its lowest rate in years, prompting Chief Executive Dick Costolo to promise tweaks to Twitter’s design.

“Expectations of Twitter growing into a communications utility that Facebook has become are “unrealistic and divorced from reality,” said Brian Wieser, an analyst at Pivotal Research. “Twitter is and will remain a niche medium, and a very powerful one.”

The social network reported having 255 million monthly active users in the March quarter, up from 241 million in the previous quarter and 204 million the same quarter a year earlier. At first blush, that might sound like Twitter is trending in the right direction, but on a year-over-year basis Twitter’s users growth continues to slow.

Twitter’s user base grew by 25% in the first quarter compared to the same quarter a year earlier. That’s down from a 30% year-over-year increase in the fourth quarter and a 39% year-over-year increase in the third quarter.

“While our near-term estimates remain largely unchanged, this quarter represents at least Twitter’s fourth in a row of stepped user growth deceleration, suggesting to us that some users are beginning to find alternative elsewhere,” Ken Sena, an analyst with Evercore, wrote in an investor note, cutting his price target to $48 from $66.

On a conference call Tuesday night, Costolo noted that the company is working to improve the experience for users by making the social network more visual and better organizing content. That said, he emphasized that engagement on the service is strong and claimed that Twitter already qualifies as a “mainstream” platform.

“Twitter – the platform – we believe is already incredibly mainstream,” Costolo said. The challenge, he added, was to convince the world to see the “value of the logged-in experience.”

Source: Reuters