#BackInTheGame
02/09/18

If you’re looking for stocks that have weathered the recent market storm, look no further than Twitter (TWTR). “Weathered” may not be the right word—the stock hasn’t simply survived the downturn, it’s thrived.

While the broad market dropped nearly 8% between January 26 and February 5, Twitter actually gained 3.5%. And after releasing earnings yesterday that showed the social media company bagged its first quarterly profit (and beat earnings and revenue estimates),1 the stock rocketed 30% higher in early trading (to $35.07) before easing off to a more “modest” 14% gain later in the session—and this on a day the broad market declined. That still put the stock up around 28% on the year, while the S&P 500 (SPX) was in the red. Now that’s relative strength.

Twitter (TWTR) and S&P 500 (SPX), 3/15/17 – 2/8/18

Source: OptionsHouse


Yesterday’s rally put Twitter front-and-center in the market news, but the stock had, actually, been staging an under-the-radar rally for months. Even before yesterday’s moon shot the stock had climbed nearly 90% from its April 2017 low close of $14.29—something that arguably did not get the press it deserved because: 1) TWTR was one of many stocks participating in a record-breaking bull market, and 2) TWTR had pushed higher a few times in the past couple of years without managing to sustain a rally.

A longer-term chart shows the stock had fallen quite a distance from its late-2013 highs before mounting the current up move:

Twitter (TWTR), 11/25/13 – 2/8/18

Source: OptionsHouse


But Twitter’s Q3 earnings (released in October) surprised many market watchers by beating estimates, and among its performance tidbits was the fact that the company grew its daily active user base 14% on a year-over-year basis—only two percentage points behind Facebook’s rate.1

In the months since, Twitter has captured more favorable analyst coverage, some of which was based on Facebook’s decision to alter its news feed. This, some suspect, will work to Twitter’s advantage since publishers and businesses getting less play on FB are expected to explore Twitter as an alternative.2 And then came yesterday’s bullish Q4 announcement.

Yesterday’s surge took the stock to its highest level since July 2015—a solid breakout above the October 2015 and 2016 highs. Some give-back of a one-day, double-digit percentage gain would not surprise veteran traders, as the stock is still fighting the headwinds of a broader market downturn. But bottom line, Twitter’s move could be a statement that the stock is serious about a turnaround.  

 

Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.


1 TechCrunch. Twitter is suddenly making money and Wall Street likes it a whole lot. 1/8/18

2 Zacks. Better Buy: Facebook (FB) vs. Twitter (TWTR). 1/18/18.

3 Bloomberg. Twitter Analyst Support Piles Up as Turnaround Gains Steam. 1/19/18.