Here we go again.
Twitter stock cratered by more than 10% overnight, opening at a new low of less than $38 a share on Wednesday after the company reported user growth in the first quarter that disappointed Wall Street.
If that sounds familiar, it's because the same thing happened in early February when Twitter reported its first earnings results as a public company. That time, Twitter plummeted more than 20% after hours as investors raised a red flag about, you guessed it, user growth.
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.
Some analysts also highlighted the fact that engagement growth on Twitter, as measured by timeline views per monthly active user, slowed down as well. Those trends were enough to spook investors, despite the fact that Twitter actually showed strong revenue growth for the quarter and beat earnings estimates by breaking even.
"Monetization was strong, however, total users and timeline views (TVs) came in modestly below expectations and continued to exhibit decelerating growth," Shyam Patil, an analyst with Wedbush, wrote in an investor note. "While management remains confident in its initiatives to drive reacceleration in user growth and TVs overtime, the underperformance is likely to cause concerns around the company's long-term growth potential and weigh on the stock."
On the earnings call Tuesday night, CEO Dick 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 as a platform, we believe, is already incredibly mainstream," Costolo said during the earnings call. "And now what we need to do is help that world of users who already experience Twitter every day understand the value, the increased value of the log-in experience."
His comments did little to reverse the decline in stock price after the earnings report. Just as Facebook was forced to convince Wall Street that it could make the transition to mobile -- an effort that took multiple quarters -- Twitter still needs to convince Wall Street that it hasn't maxed out its user base.
Twitter still trading at about 45% above its IPO price of $26 a share. That's better than Facebook could say six months or so into its life as a public company.