Twitter (NYSE:TWTR) is expected to release earnings on Feb. 7, before the open. Year-to-date, Twitter stock is up about 19%. I believe that the relatively strong recent performance of the stock has been based on robust fundamentals. Last quarter, the company topped analyst estimates after which Wall Street raised revenue and earnings estimates for 2019. I expect the trend to continue in the new year, too.

With all of that in mind, here are the reasons for my optimism toward TWTR:

Twitter Stock Pros

Data Licensing is Behind the Growth: As the world’s best-known micro-blogging platform Twitter is used by politicians, journalists and global brands. Many readers see breaking global news or the opinions of famous people on TWTR first. In its October earnings release, many analysts were impressed by Twitter’s data licensing business, a significant revenue generator which produced double-digit percentage growth.

The data licensing business involves providing additional information to companies about tweets. Recently, the company has started offering cheaper data access packages to smaller companies, a move that is likely to increase its revenue further.

Wall Street now expects Twitter’s high-margin data licensing revenue to be boosted by further international expansion, as the number of overseas TWTR users are increasing, especially in the developing world. On Twitter’s Oct. 25 earnings call, it noted that its overseas revenue had jumped over 50%.

Furthermore, TWTR will be able to monetize the videos on its website more effectively as it captures a higher percentage of ad spending that is moving to digital video.

Earnings Numbers From Other Social Media Giants: Recent research shows that most U.S.-residents get their news from social media as opposed to more traditional outlets, such as TV or print media. With more than 336 million monthly active users (MAUs), Twitter is one of the biggest social networks globally. And stock price-wise, Twitter stock has been well ahead of the rest of the social media space over the past year.

The TWTR stock price has increased almost 35% over the past 12 months

Following their recent respective earnings reports, investors have welcomed advertising revenue numbers and user growth numbers for several other stocks — a fact that could give us an indication for the potential post-earnings price action in TWTR stock. These companies include Facebook (NASDAQ:FB), Snap (NYSE:SNAP) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG). Therefore, unless TWTR’s numbers come far below expectations, a similar, positive reaction in the shares is likely.

Although I would not advocate bottom-picking as there might be more volatility and even a small initial selloff following the Twitter earnings report, the social media company’s best days from a robust fundamental perspective are likely to be ahead of it.

Handling of Digital Security Issues: During 2018, Facebook has been hurt by declining user growth following the digital security issues that were revealed by the Cambridge Analytica scandal. Facebook’s user losses accelerated and investors seem skeptical about its ability to resolve the complex problems it’s facing.

On the other hand, TWTR stock has weathered the initial headwinds of its digital security issues better than FB, as the company has taken steps to remove fake accounts and improve user engagement. Analysts and investors have credited CEO and founder Jack Dorsey with making Twitter more relevant, even as many other social media stocks are going through a rough stretch.

Technical Charts: Over the past few weeks, both long-term and short-term technical indicators for Twitter stock have broken the downtrends, moving steadily higher. As such, many of the widely watched technical indicators now suggest a bullish momentum into the stock.

Twitter stock’s 52-week price range has been $24.10 (Feb. 5, 2018) – $ 47.79 (June 15, 2018). It has been forming a base between $27.5 – $32.5. This level now acts as a support zone, from which the shares can easily make a new sustained leg upwards.

Tech stocks may still be volatile during February as there could be some short-term profit-taking following the strong January gains. In case of a favorable earnings report, my next price target for Twitter stock in the coming weeks is between $42 – $45.

What Could Derail TWTR Stock in the Short-term?

When the company reports earnings on Feb. 7, investors will pay extremely close attention to the details in the company’s quarterly results. The options markets are pricing in an approximate post-earnings move of 12% in either direction in TWTR shares.

Therefore, any disappointment in Twitter’s earnings statement or future outlook could quickly send the shares back below $30. Thus, there might be a weakness in the TWTR stock price in the near-term that potential investors should anticipate.

Nonetheless, well-performing stocks tend to keep on winning, and the recent strength of TWTR stock might be a good indication that within three or four years, investors who buy TWTR are likely to be rewarded handsomely.

On a final note, takeover rumors of Twitter have been around for several years. The two potential names to buy the company could be Alphabet or Disney (NYSE:DIS).  Such an acquisition would of course be cheered by existing shareholders.

As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.