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Twitter: What Metrics?


Twitter reports second-quarter earnings after the close today, and there is potential for mass confusion.

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Twitter (NYSE:TWTR) seems very, very hard to game ahead of earnings.

It's in a metrics mess and the second quarter looks like one big ball of confusion for two reasons.

The first is the World Cup, which may have boosted both the monthly active user count and engagement. Twitter has a problem in retaining users, and a beat in the MAU count may actually be ignored by investors, who may assume these people came and went with the World Cup.

Meanwhile, if the number is bad, the argument will be "Twitter is so not mainstream that it couldn't even generate real growth during the World Cup!". 

Unfortunately, Wall Street is fixated on unfair comparisons to Facebook (NASDAQ:FB), which has been more widely embraced by the general public. Facebook is also still showing phenomenal growth in users, even past the 1-billion mark.

Current forecasts for MAUs appear centered in the 260-270 million range.

And the second issue is the rumor that Twitter may unveil some kind of new metrics system revolving around the reach of Twitter beyond the core platform. is denying the speculation, but it's in investors' minds nonetheless.

If Twitter goes this route, it will be playing a very tricky game. It will have to shift the conversation away from the core metrics it has provided since it came public without making it look like subterfuge.

The worst possible scenario would be Twitter missing on big metrics like revenues and MAUs while focusing on some amorphous engagement calculation

Right now, perhaps the best thing Twitter has going for it is all the confusion.

It feels like everyone's afraid to dip in because of fear of a poor reading on the user metric, as well as confusion over how the metric will be read. What if we see very strong revenues but weak user numbers? Or vice versa? Lots of moving parts here.

I'm wondering if the current confusion is an opportunity.

One final thought -- the at-the-money straddle is implying about an 11% move in Twitter stock by the end of the week. That seems a little conservative.

Twitter: @MichaelComeau

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No positions in stocks mentioned.
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