Twitter Stock is a Steal at These Levels

Social media platform Twitter NYSE: TWTR stock has been fallen hard along with other social media peers Pinterest NYSE: PINS and Snap NYSE: SNAP due to slow down concerns stemming from the acceleration of the re-opening trends. This has driven money from growth stocks to value stocks as investors rush to capture what’s left of the return to normal narrative with the spread of COVID vaccinations. However, the narrative-like markets tends to overreact and overshoot reality. Twitter was a pandemic benefactor as people flocked to social media apps during isolation, enabling them to bolster new users and engagements. Logic would assume that as restrictions are lifted and people return to offices, the user engagement would fall off. This may be flawed thinking that doesn’t take the stickiness into consideration. While shares may have overshot on the upside, they are soon being overshot on the downside which can present prudent investors will opportunistic pullbacks levels as the bar gets lowered.

Q1 FY 2021 Earnings Release

On April 29, 2021, Twitter released its fiscal first-quarter 2021 results for the quarter ending March 2021. The Company reported an adjusted earnings-per-share (EPS) profit of $0.16 excluding non-recurring items versus consensus analyst estimates for a profit of $0.14, beating estimates by $0.02. Revenues grew 28.3% year-over-year (YOY) to $1.04 billion beating analyst estimates for $1.03 billion. Average monetizable daily active users (mDAU) rose to 199 million versus 166 million in the same period the previous year. The average U.S. mDAU was 38 million compared to 33 million same quarter the previous year. The average international mDAU was $162 million compared to 133 million same quarter the previous year. Twitter CFO, Ned Segal, stated, “Q1 was a solid start to 2021, with total revenues of $1.04 billion, up 28% year-over-year, reflecting accelerating year-over-year growth in MAP revenue and brand advertising that improved throughout the quarter.” He continued, “Advertisers continue to benefit from updated ad formats, improvement measurement, and new brand safety controls, contributing 32% year-over-year growth in ad revenue in Q1.”

In-line Guidance (Again)

Twitter provided flat Q2 fiscal 2021 guidance for revenues to come in between $980 million to $1.08 billion versus $1.06 billion consensus analyst estimates.

Conference Call Takeaways

Twitter CEO, Jack Dorsey, set the tone, “Our revenue products are moving faster than ever before, building out a suite of products that positively reinforce one another. MAP is the first step to unlocking revenue opportunities in direct response with large and small businesses alike. In Q1, we launched our rebuilt App Install and website click offerings, improved viewer experience for ads across Twitter Amplify, and improved brand safety with the launch of conversation controls for advertisers. We also launched Curated Categories, a brand-safe way for advertisers to run pre-roll ads exclusively against premium video content.” It’s apparent that the Company is progressing towards monetization but needs to make sure the services are not just frivolously charging for basic functions. This could backfire.

Subscription Model Testing

On May 15, 2021, it was revealed that Twitter was actively working on a tiered subscription model and rolling out Twitter Blue for $2.99 per month. Twitter Blue enables features like undoing a tweet, creating bookmark collections of tweets, and more features that seem rather basic. Perhaps the more interesting service would come from the acquisition of Scroll. Scroll enables users to deliver streaming news, research and articles without ads, videos, and pop-ups. This could actually be something users would be willing to pay for, not a generic monthly fee for functions that literally every other social media platform has available as a default. Twitter Spaces, the audio conversations product, is gaining traction and transcending as a real Clubhouse competitor. Prudent investors can watch for opportunistic pullback levels as the bar has again been set low moving forward.  

TWTR Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision playing field view of the landscape for TWTR stock. The weekly rifle chart downtrend has a falling 5-period moving average (MA) resistance at $59.58. The weekly market structure high (MSH) triggered on the breakdown under $64.32 with a secondary MSH sell trigger on the $55.05 breakdown. Shares are attempting to base off the $50.19 Fibonacci (fib) level. The daily rifle chart has been in a downtrend since the earnings reaction gap down and is testing the daily 5-period MA resistance at $51.45. The daily market structure low (MSL) triggered in November 2020 on the breakout through $47.92, which makes it a strong support level to keep an eye on. If the daily stochastic crosses down, then the daily inverse pup breakdown can lean towards the daily lower BBs. Risk-tolerant investors can watch for opportunistic pullbacks at the $50.19 fib, $48.18 fib, $45.86 fib, $42.91 fib, $40.66 fib, $37.55 sticky 2.50s, and the $35.98 fib. Watch with social media peers PINS and SNAP. Upside trajectories range from the $64.42 fib up towards the $82.75 fib level.