Twitter Stock (NYSE: TWTR) Still Soaring 21% the Day After Earnings on One Number

Updated July 30, 2014: Twitter stock (NYSE: TWTR) closed up 1.74% to trade at $38.59 per share ahead of second-quarter 2014 earnings scheduled for release after the bell on Tuesday. Only minutes after release, TWTR stock jumped 30.22% in after-hours trading. On Wednesday, shares traded at $46.97 (up 21.72%) as of 11:30 a.m. EDT.

Analysts surveyed by FactSet predicted Twitter would post a loss of $0.01 a share on $283.4 million in revenue in its Q2 2014, compared with a loss of $0.12 a share on sales of $139.3 million in the year-ago period.

Twitter beat estimates by $0.03 a share and also topped revenue estimates by $29.72 million (a 124.1% gain year over year).

These earnings were different from any other we've seen from Twitter since it went public in November 2013.

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.

On Tuesday, Twitter beat earnings, but instead of share prices plummeting, they were absolutely crushing, up more than 34% after hours.

That's because earnings and revenue haven't mattered in any of Twitter's earnings releases.

What does matter - and what's been lackluster for Twitter so far in 2014 until Tuesday's Q2 - is this number...

This Number Has Finally Changed, Sending Twitter Stock Soaring

It's all about 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.

But Tuesday's earnings saw MAU's increase 24% year over year to 271 million. Mobile MAUs reached 211 million in Q2 2014, an increase of 29% year over year, and representing 78% of total MAUs.

Driving the huge user base growth this quarter was the FIFA World Cup. The popular sporting event alone brought about 652 million tweets. Twitter introduced new product experiences that were built around the World Cup, including real-time scoring, push notifications, event and match timelines, and a voting ballot feature. In addition, Twitter launched new web profiles and the ability to send private messages within Vine.

"Our strong financial and operating results for the second quarter show the continued momentum of our business," Twitter Chief Executive Officer Dick Costolo said with earnings release. "We remain focused on driving increased user growth and engagement, and by developing new product experiences, like the one we built around the World Cup, we believe we can extend Twitter's appeal to an even broader audience."

What's more, Costolo pointed out on a call with investors Tuesday evening that Twitter's reach is actually much greater than MAUs reflect. He said there are "hundreds of millions of additional visitors who come to Twitter each month but don't log in." Therefore, he stressed, "The size of our audience is two to three times that of just our monthly active user base."

Note, though, that if the World Cup was the primary driving force behind Twitter's second-quarter active user base growth, the boost could only be a temporary one.

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...