Twitter: is data and its collation the new commodity?

Amid market turmoil, corporate earnings are still coming thick and fast. This is a huge week for the technology sector, with the likes of AOL, LinkedIn and Twitter giving investors a look at how last year’s fourth quarter panned out.

Twitter will report Q4 and fiscal-year results when the markets close on Wednesday. The company’s stock has surged since its launch on the New York Stock Exchange in November, rising from $26 to $66. Given that the other social networking giant, Facebook, surpassed analysts’ expectations in terms of earnings and revenue (particularly mobile ad revenue), there is distinct pressure on Twitter to show investors that the current share price is valid.

Twitter has always been ahead of the game when it comes to advertising revenue derived from mobile. Late last year we saw the acquisition of MoPub in an attempt to capitalise on the rapid consumer shift to mobile usage.

It may be a mistake to look at Facebook and use it as a proxy to predict the likely earnings for Twitter: both in terms of the company size and the earnings perspective, they are two different animals. Twitter is expected to say that revenues came to $217.78 million in the quarter and $639.39 million for the full year, as well as reporting a loss of 19 cents per share in 2013.

What do analysts think?

At present, analyst coverage has buy/hold/sell recommendations standing at 7/13/12. So there is something of a mixed bag here, with many not yet able to gain clarity on how the company plans to monetise its userbase.

The most bearish analysis sees the share price falling to $32 per share. The inherently interesting point here is that the share price barely spent any time at that level on its first day of trading, closing at $44.90 from the IPO price.

One could say that the stock gains back then were, to a degree, fuelled by hype. More recently, however, perhaps the surge has been based on the limited float and momentum rather than proven fundamentals.

The technicals

Of greater interest is the fact that, although 491 of the 500 stocks in the S&P 500 fell yesterday, Twitter has seen gains in its share price for the past six consecutive trading sessions – totalling a 15% rise over that time. Is it possible that Twitter is becoming its own asset class, in a similar way to Apple back in 2011?

The market turmoil seems to be bypassing the Twitter shareholder, yet the last time we saw such a big rally the share price topped out just shy of $75, resulting in a 28% decline over the following 19 days. Technically speaking, there is a decent chance that we will see a correction soon. An oversold signal on the shorter-term charts, with a bearish divergence on the relative strength index, could precede a return to the 50-day moving average – around $57.

Any significant moves through $70 per share could, on the other hand, make a run up to $75 likely.

An indispensable tool?

Twitter, which has 230 million users globally, has established itself as an essential internet utility for many people. Sitting alongside Google and Facebook, it is a product that has only scratched the surface of its potential as a global advertising medium.  Monetising the site is of huge importance, but an increased captive audience would be good start. So everyone will be watching to see how quickly that userbase has expanded.

If information is power, then the onus is now on Twitter to show investors that its future is bright.

You can trade on Twitter until 1am GMT (10pm Fridays) with our extended hours on key US stocks.

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