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Facebook vs Twitter: A tale of two very different social stocks

It's the big week for Q2 social media earnings, as Twitter reports after the bell Tuesday afternoon, followed by Facebook's earnings Wednesday afternoon.

But these are two very different stories, with Facebook trading up nearly 30 percent in the past year—near its all-time highs—while Twitter has lost more than 7 percent from a year ago, and more than 33 percent from its 2015 high in April.

Twitter is in the midst of an awkward transition. The company is looking for a new permanent CEO, and doesn't yet have a new full-time leader to talk about where the company's headed. And while the company announced "Project Lightning"—a plan to make it more user friendly and engaging—it won't roll out until this fall. That means it could report another quarter of stagnating user growth.

After lowering its guidance last quarter, Wall Street analysts expect Twitter to report revenue growth up about 54 percent to $481 million compared with a year ago—which is a 10 percent rise from Q1. Earnings per share are projected to double from a year earlier to 4 cents, according to StreetAccount.

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Chris Ratcliffe | Bloomberg | Getty Images

Meanwhile Facebook, with 4.7 times Twitter's user base, has been soaring. It's now the eighth largest company in America by market cap. Analysts are confident that users, earnings and revenue will continue to grow, albeit at a slower rate than they have been, because Facebook has simply gotten so large. Wall Street expects the company to report revenue growth of 37 percent to $3.983 billion, while earnings per share growth of 12 percent to 47 cents.

Bank of America's Justin Post, who just added Facebook to Bank of America's top investment ideas, is bullish on the social network thanks to improving ad targeting, video traction, Instagram ad ramp and growth of new platforms. Post said Facebook is "well positioned for increasing ad monetization, and with easier comparisons in 2Q, it is possible that ad revenue growth accelerates."

Facebook's success has to a certain extent come at the expense of Twitter. For one thing, Facebook has made investments in two areas where Twitter once dominated—sharing news and following public figures. And based on Facebook's reports of early traction for its "Instant Articles," plus the growing number of "likes" public figures from Taylor Swift to President Barack Obama have been drawing—these investments have yielded growing engagement.

We'll be listening closely on the earnings calls for hints of Twitter's evolving strategy, and for updates on Facebook's still untapped potential with Instagram and Messenger.

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