Key Numbers To Watch When Twitter Reports Earnings On Wednesday

At the time, the company had failed miserably at competing with bigger rivals such as Facebook (NASDAQ:FB), and it looked as if a takeover of the sputtering company was just about a done deal. So, what's turned Twitter’s outlook around so radically? Why, in such a short period of time, are its future prospects so altered that even the company’s severest critics have been forced to change their negative opinions on the company?

We think Twitter's positive momentum is all about the company's success at making its platform a destination for interactions between a much broader audience than what it originally was—a site monopolized mostly by journalists, politicians and entertainers.

Twitters’ Chief Executive Officer and co-founder Jack Dorsey has been able to generate that momentum mainly via the site's streaming video offerings—a key part of his turnaround strategy, which has started to pay off. Twitter’s partnerships with news outlets and sports leagues are attracting a variety of top advertisers including Goldman Sachs (NYSE:GS) and AT&T (NYSE:T). These advertisers are loving the opportunity to place their ads directly in user timelines; they're also appreciating the possibility of running brand campaigns next to live broadcasts.

During the fourth quarter, the number of active, daily users rose by 12%, Twitter’s fifth consecutive quarter of double-digit, year-over-year growth. The company also says video advertising is now its most popular ad format.

Investors are welcoming the new direction. Their appreciation has pushed Twitter shares higher by 30% this year, making it one of the top performing technology stocks so far in 2018.

Still, despite the recent gains, there's a long journey ahead for Twitter, before it can fully catch up to the competition. With 330 million monthly active users, Twitter has managed to attract only a fraction of the digital advertising market compared to Facebook, which has over 2 billion monthly users.

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The biggest question going forward is whether the company can sustain this momentum in the rapidly-changing landscape for social media companies. This will be especially salient now that politicians are seriously reconsidering the regulatory environment surrounding consumer privacy protections after Facebook's disastrous data breech, perpetrated by Cambridge Analytica. Additionally, Twitter will also have to contend with another issue that Facebook is currently addressing: how to stop anti-state elements from misusing these social media platforms.

All these challenges notwithstanding, one thing is certain. Twitter's survival is no longer in question. It’s now an established social media player that's managed to position itself to take advantage of the weakness of its biggest rival, in the aftermath of Facebook's crisis of credibility in this post-Cambridge Analytica world.

Bottom Line

We see a double-digit jump in its share price, which closed yesterday at $31.22, if Twitter reports another blow-out quarter on Wednesday morning. The Street sees revenue rising by 10% to $605.3 million, with profits of $0.12 per share, up from just $0.07 per share a year earlier.

One of the key statistics to watch tomorrow is the number of daily active users Twitter reports. Any additional improvement in this number may trigger another round of speculation regarding a potential acquisition of Twitter by a cash-rich player, such as Microsoft (NASDAQ:MSFT).