Twitter (TWTR) delivered along our expectations, yet, an overly enthusiastic investor base seems to have reacted more negatively to the company's first-quarter results. We believe the stock price has more downside than upside at current levels, and we would encourage investors to look to alternatives, notably Google (GOOG), at this time. Still, after adjusting our model, we are slightly increasing our fair value estimate to $29. Also, our narrow moat rating remains, and we believe the company is making strides investing in its economic moat.
Overall revenue grew 119% to $250 million, paced by ad revenue growing 125% to $226 million. For our purposes, we aren't overly concerned about the lack of GAAP profitability (posting a net operating loss of $129 million) as our investment thesis primarily depends on growth in users (monthly active users, or MAUs) and continued increases in revenue per user. MAUs grew 6% sequentially, a positive sign, although we note that our valuation still calls for a faster reacceleration of user growth over the next six to eight quarters. On the monetization front, while there is no cause for alarm, a modest sequential decline in revenue per user (from $0.91 to $0.89) prevents us from becoming more bullish in our valuation. Our long-term model calls for a near-tripling of revenue per user to more than $11 per year. Given the premium to our fair value estimate and our optimistic assumptions, we believe investors should watch from the sidelines and wait for a more reasonable entry point.