Stock Pick: Twitter Incorporated

Twitter Incorporated operates a popular social media platform that enables users to post and engage with messages known as tweets. In addition, the social media channel offers promoted products and services which include promoted trends, promoted accounts, and promoted tweets. These features allow advertisers to endorse their products and services. The company has 3,372 employees with 2017 revenues amounting to $2.44 billion.

Technical Analysis of Twitter Incorporated (TWTR)

TWTR moved as high as 74.73 in December 2013. Unfortunately for buyers at that level, the stock went into a freefall after it hit that price level. The downtrend began in March 2014 when TWTR breached support of 50. Bulls mounted multiple attacks to take out the resistance, but each attempt was denied. With bears in full control of the market, the stock dropped to as low as 13.91 in February 2016.

At that price level, TWTR formed a solid base. The base building continued until October 2017 when the stock surged in price and volume. The price action was a signal that the stock was ready for a bull run.

Technical analysis show TWTR broke out of a rounding bottom reversal pattern on the daily and weekly charts. The breakout looks valid as it was pushed by heavy volume. On top of that, the stock climbed as high as 47.79 in June 2018.

Recently, TWTR has been correcting. Nevertheless, this may be an opportunity to buy the dip.

Fundamental Analysis of Twitter Incorporated (TWTR)

On top of the technical analysis, fundamentals offer some support to our bullish outlook. TWTR’s trailing twelve months (TTM) price to earnings ratio (PE ratio) is 62.63. The stock appears overvalued. However, it has a three-year maximum of 333.4. This tells us that investors are willing to pay a premium for TWTR shares.

In addition, Variety reports that Twitter’s quarterly results beat expert estimates. Analysts predicted that the company would generate revenues of $605 million and a profit of 12 cents per share. However, Twitter posted revenues of $665 million and an earnings per share of 16 cents.

The strategy is to buy on dips as close to 30 as possible. If bulls can stay above this level, then we might see TWTR climb to 39.80. This point is crucial because by then, the stock would have created an inverse head and shoulders pattern. We’ll revisit TWTR once the target is hit for the possibility of a breakout.

The timeline for the initial target is less than three months.

Daily TWTR Chart

Weekly TWTR Chart

As of this writing, the Twitter Incorporated stock (TWTR) is trading at 32.98.

Summary of Strategy

Buy: As close to 30 as possible.

Target: 39.80

Stop: Close below 28.40.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.