Twitter users and engagement disappoint, shares dive

Twitter Inc posted a disappointing 7 percent slide in a closely watched measure of engagement even though its user base grew 23 percent in the third quarter, triggering a more than 9 percent decline in its stock on Monday.

The online messaging service also projected fourth-quarter revenue that may miss Wall Street's targets.

Expectations had run high for Twitter since the messaging service, which for years had fought to revive growth in users, surprised Wall Street in the second quarter by signing up 24 percent more people globally.

Excluding Monday's decline, Twitter's shares have gained almost 19 percent since July.

Some investors had raised fears about declining Twitter usage as other social media and mobile messaging services BECOMEmore popular.

The company reported monthly active users, an important metric scrutinized by investors who worry that Twitter's growth has peaked, rose 23 percent to 284 million in the quarter.

That was down slightly from 24 percent in the previous THREE months, when the World Cup helped drive traffic to the service, and remains well behind Facebook's Inc's community of more than a billion people.

Twitter executives again noted on Monday that the service's reach is actually far greater than its 284 million users, citing hundreds of millions who visit the website or are exposed to Twitter content without logging on.

But timeline views per user, which measures engagement, slid 7 percent globally to 636. Views slid 6 percent in the United States to 774. And overall, total timeline views of 181 billion slightly missed analysts' expectations.

Twitter executives, however, say that changes introduced to make it easier for users to view content have in effect reduced page-refreshes, consequently pushing down timeline-views.

"For a stock like Twitter, which is up a bit since the last quarter, expectations were high," argued Sterne Agee analyst Arvind Bhatia. "People expect more than just in line."

On Monday, the messaging service said revenue more than doubled to $361 million in the third quarter, beating an average forecast for $351.4 million.

But it projected sales of $440 million to $450 million in the holiday quarter, versus expectations for around $448.8 million.

The company reported a non-GAAP profit a penny per share, versus a 13 cent loss a year earlier, in line with expectations.

Shares of the company slid 9.1 percent to $44.17 after closing at $48.56 on the New York Stock Exchange.

"They beat on the top line but that was a small beat," Bhatia said.