Twitter Inc. (NYSE: TWTR)
Twitter as a company and a stock has seen its fair share of ups and downs. Recently, news regarding “Periscope” was supposed to give the stock and investors a lift. For many retail investor’s social media corporations are like the proverbial “king with no clothes”. Simply put, outside of intrusive advertising how do we monetize an update feed? Where are the actual capital assets on the balance sheet outside of the odd trending hashtag? Despite this obvious concern the platform continues to be a living necessity for a massive community of Tweeters who like to follow and interact with the news, gossip, and the world of celebrities. Like other stocks in the social media sector the stock has been the subject of much rumor and innuendo behind the markets.
As of June 1, 2105 the stock closed at $36.61. Within a six month period alone in 2014 the stock was in a range between a high of $69 and a low of $30.50. Such movement and volume provides investors with ample opportunities both on the short side and the long side. On April 27, we saw a massive implosion in some of the big names. The stock went from a challenged $51.66 to $38.49 within two days. This was after posting both a revenue miss and disappointing forward guidance.
Analysts on Twitter
Tyler Craig of Investorplace is of the view that the pumelling of TWTR volatility recently could be nearing an end. According to Craig there are now good opportunities to get call and put options on the cheap. Most commentators with a positive outlook for the stock seem to be speculating that in some way Twitter has found a bottom at the present price range. However, many analysts are of the view that the stock is now oversold and represents a good short to intermediate term buying opportunity. This suggestion does not come without warnings. Jeff Reeves of Marketwatch in early May described the stock as no bargain. In particular, Reeves notes in response to Periscope that “When investors overlook a deteriorating narrative in the stock itself, only to latch on to a small and unproven division in that company, that’s just crazy”. So if that is the worst case scenario what are the hopes? A buyout by Facebook or Apple perhaps? The cynical individual out there would be of the view that any potential buyout suitors would wait for a price implosion before swooping in. With a market cap of about $23.92 Billion the company might still be regarded as too pricey for a buyout.
A Look Ahead
It seems that from the volatility perspective at least the market is treating it a bit more like a blue chip. What remains to be seen is if the stock can in a moderate to medium time-frame recover its position to the previous lofty heights experienced in 2014. For such a recovery to happen, Twitter is clearly going to have to offer investors something more substantial than Periscope. We witnessed a similar market reaction recently after AAPL corrected even after showing dazzling profits. A long view of the market might involve Twitter recovering as AAPL and other stocks start to move concurrently. A short view might be a tumble from the present line of resistance in the $30’s as users continue to leave the platform. For Twitter, the coming months will be very interesting from the market perspective.