Talking Numbers

Why Twitter is a falling knife

Twitter is a falling knife

Is Twitter for the birds?

Twitter announced its most recent quarter's results and the numbers weren't quite what the Street was hoping for.

Sure, revenue was $250 million (about $9 million more than expected) though Twitter ended up losing $132 million during the course of those three months. On a non-GAAP basis, earnings were flat, which was slightly better than analysts' expectations of a three-penny loss per share.

But the real problem was user growth. Although monthly active users were up 13 million from the previous quarter to 255 million, Wall Street was hoping for 257 million. That may not sound so bad but it's taken as a sign that Twitter's growth is slowing considerably and may continue to do so in the future.

(Read: Why Twitter is shrugging off active-user decline)

Wednesday was the microblogging giant's stock's third-worst day since going public. Though still sizably above its IPO price of $26 per share, Twitter shares now trade lower than their first day's closing price of $44.90.

Gina Sanchez, founder of Chantico Global, said Twitter isn't just facing problems with engagement and user growth, but also has to contend with stiff competition from other social networks for advertising dollars.

"It just never quite got the large user base as Facebook but it's now losing to Instagram," said Sanchez, a CNBC contributor. With advertisers, "YouTube and LinkedIn are both ranked above Twitter."

Sanchez believes that Twitter's slowing user base growth and the competitive marketplace are obstacles.

"That's challenging and I think that's hugely problematic," Sanchez said.

(See: CNBC's Social Media coverage)

"Talking Numbers" contributor Richard Ross noted that there is still not a lot of data to go by but he is nonetheless negative on Twitter's stock based on the charts.

"This is a stock which wants to go lower here," said Ross, global technical strategist at Auerbach Grayson. "Is it a $70-stock? Clearly not. Is it a $16-stock? It might just be based upon the negative momentum that we're seeing."

The stock has broken below its previous post-IPO low of $38.80 set in late November. After previously disappointing earnings in February, it had a huge gap down, breaking below its 50-day moving average.

"If you're looking for a bottom, clearly don't catch the falling knife here," Ross warned. "The better play is to wait until you reclaim even a basic moving average like the 50-day before you even think about stepping in here."

Ross said the stock is still trying to figure out its levels and notes that another large social media stock also had trouble shortly after going public.

"Remember, it sounded like Facebook was going out of business when the stock was at $14," Ross said. "Now look at that great success story…. I think Twitter is still at about the fourth inning here. We've got a long way to go, both down and potentially up. But, I'm not particularly optimistic in the short term and I would not be buyer of the stock here."

To see the full discussion on Twitter, with Sanchez on the fundamentals and Ross on the technicals, watch the above video.

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