The Twitter stock price today dropped to $28.32 in early-morning trading Wednesday after closing at $31.34 on Tuesday before Twitter announced 2015 Q3 earnings after the bell yesterday.
TWTR shares rebounded to close the day down 1.41% to $30.86. What drove shares down so much initially was a key data point in its earnings...
Twitter Inc. (NYSE: TWTR) reported $569 million in revenue, which represents a 58% year-over-year increase. While the revenue growth is impressive, Twitter's new data on monthly active users (MAUs) is lagging. Twitter reported 320 million MAUs for Q3, representing just a 1.25% increase from the 316 million MAUs reported in Q2.
You see, MAUs are vital to Twitter's total revenue. In Q2, 88% of Twitter's total revenue came from mobile advertising. Research service BI Intelligence reported that mobile ad spending could reach as high as $42 billion by 2019.
In order for Twitter to get a piece of the mobile ad spending boom, it needs to attract more users for advertisers to reach.
Twitter has not only fallen behind Facebook Inc.'s (Nasdaq: FB) 1.4 billion MAUs, but Instagram now has 80 million more MAUs than Twitter, with 400 million reported on Sept. 24.
According to The Wall Street Journal, Twitter's Chief Financial Officer Anthony Noto implied that Twitter won't achieve user growth until it is easier to use.
To his credit, Twitter Chief Executive Officer Jack Dorsey has embarked on actionable steps to make Twitter easier and more appealing. Dorsey released the live event feature known as Moments in early October, and he's removed the 140 character limit for direct messages.
With TWTR stock nearing its initial public offering price of $26, investors wonder if this is a good entry point...
At $30, Should You Buy Into the Twitter Stock Price Today?
The best way to profit off of TWTR stock is to buy in when Twitter records more MAUs - not now. Outside of investors looking to short Twitter stock, this means long-term investors are going to have to wait for profitability.
Twitter faces extensive competition from Facebook, has to figure out how to attract and maintain users, and Dorsey must prove that he can handle being Twitter's CEO and prepare for the Square IPO, the other company he currently runs.
Money Morning Chief Investment Strategist Keith Fitz-Gerald offered a strong warning in August for those who think Twitter stock is a buy...
Jack Delaney is an Associate Editor for Money Morning. You can follow him on Twitter and follow Money Morning on Facebook.