Social Networks Pop Ahead of Twitter's Earnings Report

U.S. stock markets moved higher today as strong earnings helped lift investors' moods. According to the Conference Board, consumer confidence also remained high at 82.3 in April, indicating that consumers remain optimistic about the direction of the economy.  

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) was up 102 points, or 0.62%, late in trading on widespread gains among its 30 member companies.

Social media front and center
Two of the biggest winners on the market today are Facebook (NASDAQ: FB  ) and Twitter (NYSE: TWTR  ) , which respectively were up 3.5% and 6.9% There's growing understanding among investors that both companies are starting to generate the kind of revenue and profit their popularity allows.

Facebook's latest quarterly earnings results showed a 72% jump in revenue to $2.5 billion and a near-tripling of non-generally accepted accounting revenue to $882 million, or $0.34 per share.

FB Revenue (TTM) Chart

FB Revenue (TTM) data by YCharts.

The hope is that Twitter's results will show similar gains, if not more, given the social media company's popularity. Twitter is scheduled to report earnings after the market closes today, and Wall Street is expecting revenue of $241.5 million and a loss of $0.03 per share. If the company can exceed those expectations the stock could continue to grow beyond its $24 billion market cap.  

Investors are loving Facebook's financing results recently. Source: Facebook.

Keep in mind that Twitter's revenue has grown more than sixfold, from $106 million in 2011 to $665 million in 2013. That torrid rate of growth may slow, but Twitter, along with Facebook, is redefining the way people interact and connect in the modern world. Advertisers and users will follow that kind of business, and as social networks mature they become "stickier," or harder to replace by new peers.

Of course, these are both highly valued stocks, so if Twitter misses its numbers the gains the stock grabbed today could vanish quickly. But that's the risk of a stock like Twitter or Facebook.

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Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

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8/28/2015 10:54 AM
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