Twitter Is Getting Smoked

The stock is off by 13.3% in pre-market trading. It's at $42.15.

Twitter's numbers were all right in line with analyst expectations. Revenue was even slightly ahead of expectations.

It wasn't good enough.

Ben Schachter at Macquarie Research put it best, saying, "For a stock trading at ~30x '16 EBITDA, it needs to be beating meaningfully, and cleanly, on all metrics."

Analysts at Bank of America and RBC downgraded the stock from buy to hold.

Here, via Street Insider, is why Bank of America downgraded the stock, and cut its price target to $50, from $60:

"Our thesis on the stock was based on: 1) revenue upside from new ad formats, 2) improving MAU trends from product changes, and 3) opportunity to convert or monetize non-logged in users. Call commentary suggest that these opportunities still exist (11/12 analyst day will highlight opportunities), but 4Q guidance suggests the ramp will not be consistent and or as fast as we expected to drive stock higher near-term, and we have less confidence in the long-term MAU ramp."

That last part is key. Analysts are worried that Twitter's guidance suggests another quarter of weak user growth.

This is the big problem for Twitter. It's a mainstream product that is well-known around the world, but it has failed to gain a global audience of logged-in monthly users. Until it can either prove that it can become a Facebook-sized company measured by users, OR become a Facebook-sized company measured by revenue, then these questions will dog it.