Twitter tumbles 14% after 1st-quarter earnings disappoint on user-growth expectations

• Twitter stock tumbled as much as 14% on Friday after the social media giant's first-quarter earnings report disappointed.
• The company's revenue and earnings beat estimates, but the company's monthly active user count came in below expectations.
• Wedbush lowered its price target for Twitter to $65 a share, from $75.

Shares of Twitter tumbled as much as 14% on Friday after the social media giant's first-quarter earnings report disappointed Wall Street investors. The decline erased $7 billion from the company's market cap at intraday lows.

Although Twitter's revenue and earnings came in slightly higher than expected, the company's monthly users disappointed, and commentary signaled a possible slowdown in user growth.

Twitter's monthly active users came in at 199 million, below expectations of 200 million. Furthermore, the company indicated low double digit growth for the rest of the year, with a low tick in the second quarter as the world continues to re-open.

"Twitter reported 1Q revenue at the top end of guidance and slightly ahead of consensus with 2Q revenue guidance essentially in-line with consensus," said Wedbush's Ygal Arounian. "However, coupled with a slight miss on users in 1Q (especially in the US), mDAU growth for the remainder of the year below the 20% long-term growth rates set at its Investor Day in February, and shares +44% since 1/15 vs. the Nasdaq at +8%, results were not enough."

He added: "Additionally, Twitter's digital advertising peers all saw significant beats on revenue with guidance ahead of 2Q expectations, meaning Twitter, so far, has participated somewhat less in the digital advertising market rebound."

The Wedbush analyst downgraded his Twitter price target to $64 from $75 and reiterated his "neutral" rating.

Scott Kessler, Third Bridge's global sector lead for TMT, also said investors were likely disappointed in Twitter's low user numbers despite the company's revenue and earnings beat.

"Nonetheless, it seems the growth story is largely intact, just as the major live events that are so important to Twitter, are ramping up. Sports come to mind, for example, with the summer Olympics in Tokyo set to start in just a few months. However, it does seem that many live events, including sports, haven't regained the kind of audiences previously achieved," Kessler said.