Twitter Stock's (NYSE: TWTR) Peculiar Post-Earnings Pattern By Tara Clarke

Twitter stock (NYSE: TWTR) gained 2.16% to trade at $38.75 per share ahead of its second-quarter 2014 earnings scheduled for release after the bell on Tuesday.

But the gain won't last - just take a look at this peculiar pattern and you'll see why.

You see, on Feb. 5, the microblogging site announced its first-ever earnings as a publicly traded company. It topped Wall Street estimates by $0.03. Revenue of $243 million beat projections by $26.14 million, and constituted a 116% increase compared to the same period the year before. Twitter's advertising revenue, which made up 90% of the company's total revenue, came in at $220 million, an increase of 121% year over year; mobile advertising revenue was more than 75% of total advertising revenue.

That day, TWTR stock fell more than 13% in after-hours trading, and opened the next day down 30.35%.

On April 29, Twitter posted another beat with Q1 earnings. Its revenue of $250.5 million beat projections by $9.6 million, and constituted a 116% increase compared to the same period a year before. Still, Twitter stock plunged 10.4% in after-hours trading that day. Shares dropped as low as 14.22% in pre-market trading the following morning. Ad revenue came in at $226 million for a 121% increase versus the prior quarter, and mobile ad revenue was up 5%.

That day, again, Twitter stock plunged more than 10% despite an earnings win. At market open the next day, shares opened down 11.78% - they'd dropped as low as 14.22% in pre-market trading.

For today's Q2, analysts surveyed by FactSet predict Twitter will post a loss of $0.01 a share on $283.4 million in revenue, compared with a loss of $0.12 a share on sales of $139.3 million in the year-ago period.

Here's the thing: earnings and revenue don't matter right now for Twitter, and that's why these earnings beats repeatedly haven't had any positive effect on the stock.

What does matter - and what's been lackluster for Twitter so far in 2014 - are these three numbers to watch for today...

First, take a look at Twitter's active user base, or MAU's (monthly active users).

In Q1, the company posted a quarterly gain of 5.8% to 255 million. This growth wasn't enough to inspire investor confidence - a big reason Twitter stock dropped after earnings in April. Mobile MAUs rose 8% that quarter, and only 3% the quarter prior. Unique mobile visitors in the U.S. grew 34% compared with the same period a year ago - a huge decline from the 50% growth seen the quarter prior, according to a report from RBC Capital Markets citing comScore data.

Today's earnings may see an increase in MAU's on account of the FIFA World Cup. The popular sporting event alone brought about 652 million tweets. Note, though, that if the World Cup does affect second-quarter active user base growth, the boost is likely only temporary.

Mark Mahaney, an analyst at RBC Capital Markets, is predicting that Twitter will have added just 8 million users in the quarter. On the other hand, financial services firm Cantor Fitzgerald is estimating the company will have gained 15 million, reaching 270 million monthly active users.

"If Twitter cannot grow users, it had better figure out a way to convince advertisers that it has a sufficiently unique platform so that its advertising offerings does not just turn into a commodity product," CNBC's "on-air stocks" editor Bob Pisani wrote.

The second number to watch today is ad revenue growth.

Twitter's ad revenue grew 125% in the first quarter, but according to Mahaney, the number will likely decelerate to about 110% this quarter.

And thirdly, keep an eye on net loss. Despite beating on revenue and operating earnings estimates last quarter, Twitter's net loss grew by more than $100 million to $132.4 million ($0.23 per share). The net loss the same quarter a year earlier was $27 million ($0.21 per share).

Today, a net loss of $0.01 per share is predicted, marking three consecutive quarterly net losses. Revenue projections of an 11% gain may make up for the net loss, but MAUs will play a part.

These three numbers - MAUs, ad revenue, and net loss - are behind Twitter stock's plunging pattern following earnings in 2014.

They are why Money Morning Chief Investment Strategist Keith Fitz-Gerald has long believed that the fundamentals of Twitter simply aren't solid and the TWTR stock price is overvalued.

"Customers are leaving in droves, you've got a complex thing they can't monetize, and the next best thing is a click away," Fitz-Gerald said in an appearance on FOX Business' "Varney & Co." Dec. 30.

A disciplined trader may see some quick profits from Twitter stock, but Fitz-Gerald recommends investors stay away for now.

As we move into late July - and find that August is right in our windshield - we're also hitting prime vacation season. And if you're like Money Morning Executive Editor William Patalon III, you want to use that time to catch up on your reading. That's why Patalon put together a list of his top 12 "investing classics" - the time spent reading these have a long-term payoff...

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