Twitter: The Blue Bird In The Coal Mine

Twitter, $TWTR, will report earnings after the bell today and much more is riding on its performance than its stock price. Investors on are looking to Twitter’s earnings report and subsequent stock performance to confirm or dispel speculation about a social networking-led tech bubble.

It's pretty clear to us here: tech momo bounced off bottom BB yesterday, followed thru today. If $TWTR ers is good, we can short-term bottom

— HCPG (@HCPG) Apr. 29 at 12:22 PM

Twitter’s stock climbed 3.6% in advance of its report. Sentiment on the stock is 71% bullish, according to StockTwits’ analytics. Facebook, $FB, and LinkedIn, $LNKD, were also up in anticipation of spillover from a positive report.

The micro-blogging company is expected to report a loss of $0.03 per share on $241.47 million in revenues, according to stats on Yahoo Finance. Many investors anticipate it will beat consensus estimates.

Twitter Inc (TWTR) Expected To Post Strong Q1 Earnings Results $TWTR

— ValueWalk (@valuewalk) Apr. 29 at 01:07 PM

But a beat alone may not propel the stock. Investors will carefully examine Twitter’s user growth for signs that Twitter in particular, and social networks in general, will be the way the world communicates.

Twitter’s past performance hasn’t been encouraging. Twitter’s year-over-year user growth has decelerated rapidly, as shown in this chart below by statistics site Shot 2014-04-29 at 1.33.05 PM

In the U.S. it has fallen from a high of 100% growth in the fourth quarter of 2011 to around 20%. Worldwide, growth has fallen from more than 120% in the fourth quarter of 2011 to less than 40%.

Sorry Twitter, they're just not that into you $TWTR

— Mike McDermott (@MercenaryMike) Apr. 29 at 12:47 PM

Twitter’s stock has fallen nearly 40% this year as user growth has slumped. Some on doubt Twitter reinvigorated growth this quarter and they expect the market to punish the company for it.

$TWTR when user growth only goes from 9m to maybe 15m, market will run from this like plague

— Davey Ola (@zilla) Apr. 29 at 12:50 PM

A Twitter fall could take down valuations in the entire sector. With a market cap of about $23.79 billion, Twitter trades at nearly 192X its expected 2015 earnings. That’s among the highest P/E ratios in the social networking group. Facebook, $FB, trades at 31.49X expected 2015 earnings. LinkedIn, $LNKD, trades at nearly 62X 2015 earnings, according to CapitalIQ stats published by Yahoo Finance.
Some investors said they were staying away. The downside risk was too great should Twitter’s user growth, earnings, or revenues fall short of expectations.

$TWTR – Just a thought, but buying a battered stock with high expectations into earnings? Nah. I'm not doing that.

— Andre Smith (@andrethesmith) Apr. 29 at 01:20 PM

$twtr is a sell if you're a day trader.

— AlejandroMasari (@AlejandroMasari) Apr. 29 at 01:08 PM

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