Twitter Inc. (NYSE:TWTR) shares surged more than 30 percent earlier this week after the social networking giant reported fiscal 2014 second-quarter earnings of 2 cents a share, excluding items, on revenue of $312 million, compared to a loss of 12 cents a share, excluding items, on revenue of $139 million a year earlier.

Wall Street had expected Twitter to report a loss of 1 cent a share on $283 million in revenue, according to analysts polled by Reuters.

“Our strong financial and operating results for the second quarter show the continued momentum of our business,” Dick Costolo, chief executive officer of Twitter, said in the company’s second-quarter earnings statement. “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.”

Twitter’s non-GAAP net income for the quarter ended June 30 was $15 million compared to a non-GAAP net loss of $16 million in the same period last year.

Time to Buy Twitter Stock?

Before Twitter's earnings release on Tuesday, the company had lost over 40 percent of its market value since the stock hit a record close of $73.31 on December 26, 2013.

“I think investors should wait a couple of more quarters before they buy Twitter,” Alan Valdes, vice president of trading at DME Securities, said to IBTimes.

Ahead of the company's quarterly results, Rapid Ratings International (RRI) rated Twitter a 16, or “very high risk,” on its 0-100 point scale that measures a company’s financial health. The rating is not necessarily an indication of the stock’s value, which takes into account other technical factors including the market momentum and general sentiment. The firm does not include stock pricing or any other market pricing in their analysis because “they really are independent.”

“They desperately needed to put some good numbers on the board which they’ve done relative to expectations,” James Gellert, chairman and chief executive officer at Rapid Ratings International Inc., told IBTimes. “I think there’s still a long way to go before they can prove themselves as a very financially healthy company, but at least they are reversing some trends and starting to show some traction.”

The firm’s financial heath rating is a reflection of how a company is performing relative to its global industry peers, historically and today. Because Rapid Ratings looks at a rolling four quarters when analyzing a company, any one good quarter does not necessarily move a rating up or down.

Twitter vs. Facebook

RRI rated Facebook Inc. (NASDAQ:FB) a “healthy” 73 at IPO, and after the company’s most recent earnings report, Facebook is currently rated 70. On the other hand, Rapid Ratings rated Twitter at a “very high risk” 19 at IPO and currently ranks the social networking company at 16 following its second-quarter earnings announcement on Tuesday. Corporate networking site LinkedIn Corp. (NYSE:LNKD) is scored at 22 and Chinese microblogging website Weibo Corp. (NASDAQ:WB) is scored at 18.

“Twitter is still a less mature company,” Gellert said. “Facebook has an extended history of being able to raise capital privately before the IPO and in the IPO. Their returns on capital employed have been impressive and they have executed on their plans pretty consistently.”

Last week, Facebook shares jumped after the social media giant reported fiscal 2014 second-quarter earnings of 42 cents per share, excluding items, on revenue of $2.91 billion, compared with a profit of 19 cents a share on revenue of $1.8 billion in the year-ago period. Mark Zuckerberg, Facebook founder and chief executive officer, said the company beat Wall Street earnings and revenue estimates thanks to its strong mobile advertising business that soared "over 151 percent year-over-year" and now makes up 62 percent of the company’s advertising revenue.

“Facebook has moved up right below the prior highs that it hit back in March,” Mark Newton, chief technical analyst at Greywolf Execution Partners, said to IBTimes. “It’s very well positioned. Technically, the stock is quite bullish. I see it very unlikely the stock can get over $72, $73 dollars before it pulls back. I’d love to have a change at buying the stock as it pulls back to the sixties.”

Aside from the user growth stats, RRI said Twitter needs to improve its overall profitability, sales performance, debt service management, leveraging and working capital efficiency, which are five out of the six performance categories the firm measures. Twitter’s cost structure is the only category where RRI sees strength.

Mobile Ad Growth and Active Users

Twitter said the average of monthly active users grew 24 percent to 271 million year-over-year, as of June 30, 2014. This was an increase of 16 million from the previous quarter, the highest number of absolute net new user adds in five quarters. Mobile monthly active uses rose 29 percent from last year to 211 million, representing 78 percent of total monthly active users.

Twitter's advertising revenue increased to a total of $277 million, the highest rate of year-over-year growth the company has seen in advertising revenues in the last six quarters. Mobile ads were 81 percent of total advertising revenue.

“Mobile users and mobile advertising revenue is what the whole market is focused on, but ultimately at the end of the day it’s all about how they’re going to be able to monetize the entire business and show efficiencies across all of the different business areas,” Gellert said.

As of June 30, 2014, Facebook said monthly active users were 1.32 billion, up 14 percent year-over-year, and mobile active users rose 31 percent to 1.07 billion from the same period in 2013. Revenue from advertising was $2.68 billion, a 67 percent increase from the same quarter last year. Mobile advertising revenue represented nearly $1.66 billion, or 62 percent of ad revenue, compared to approximately $660 million, or 41 percent of ad revenue in the second-quarter of 2013. Desktop ad revenue was up 8 percent from last year.

“There’s still a big difference between the companies, which I would attribute to Facebook’s greater maturity as a company and ability to generate material profits and to have stronger cost structures, leveraging, debt service management, revenue production and so forth,” Gellert said.

World Cup

Both Twitter and Facebook saw strength in their advertising business due to the 2014 World Cup. Twitter said during the Germany-Brazil World Cup game the company had nearly 2 billion Tweet impressions off of Twitter in addition to the 4.4 billion impressions on Twitter’s owned and operated properties.

“It’s nearly 6.5 billion impressions in a single match, highlights the continued expansion of our global reach and impact,” Twitter CEO Dick Costolo said during the company’s second-quarter earnings call with shareholders.

Meanwhile, Facebook saw more than 350 million people made more than 3 billion interactions during the global event. The World Cup final was the single most talked about sporting event in Facebook history, the company said during its earnings call, generating 280 million interactions from 88 million people.

Forward-Looking Guidance

Twitter expects revenue for the third-quarter in the range of $330 million to $340 million. The company revised its outlook for the fiscal 2014 year and estimates revenue in the range of $1,310 million to $1,330 million, which is $95 million above the company’s previous range at the midpoint.

“I think you’ll see people buying the stock [Twitter] because people tend to like any stock that’s going up, but that doesn’t necessarily mean that the financial health of the company warrants that stock exuberance,” Gellert said.

Facebook expects the company’s total 2014 GAAP expenses, including cost of revenue and stock compensation, will likely grow around 30-35 percent. The social media company expects its total non-GAAP expenses, including cost of revenue but excluding stock compensation, will grow at a similar rate.

Facebook shares fell 2.71 percent on Thursday to close at $72.65 while shares of Twitter declined 2.40 percent to end the session at $45.19.

“I’d expect to see continued positive momentum in Twitter’s stock,” Gellert added. “It still seems like an incredibly rich valuation to me.”