Social media giant Twitter TWTR has not been immune to the recent tech sector volatility, and shares of the perpetually struggling stock have dipped more than 4% since the sell-off began last Friday. Of course, that means Twitter has made out better than several of the other major tech stocks, which puts the company in a unique spotlight.
In fact, Twitter has been under the spotlight since its last earnings report, when the company posted better-than-expected earnings and user growth numbers. Shares climbed more than 20% in the weeks following the report, and although the stock has given some of those gains back, the last two months have been refreshing for Twitter investors.
So does that mean this week’s 4% dip presents us with a good buying opportunity? Should you buy TWTR at a slight discount right now? Let’s take a closer look:
The first thing we should note here is that Twitter was able to record a respectable 3% jump in users during the most recent quarter. While this may not seem like much, it was the result of Twitter adding 8 million new users in the quarter, which was well ahead of our estimates. This certainly doesn’t predict whether Twitter will be able to keep that pace up, but it was interesting to see the company exceed expectations after years of disappointing user growth.
Twitter has been active in its efforts to attract new folks, most notably with its recent push to promote livestreaming. While the company’s bet on Thursday NFL games last season didn’t seem to pay off, Twitter still appears confident in the idea and is doubling down on its content investments. Most recently, the company inked a deal to stream a popular Game of Thrones aftershow (also read: Twitter Inks Deal to Live Stream Game of Thrones Aftershow ).
We should also mention that Twitter currently has a VGM grade of “B,” which means its fundamental picture is sound. However, some of the stock’s value metrics are questionable. The fact that the company is still posting losses obviously affects things, but even the P/S ratio-a metric preferred for loss-making tech companies-stands at a lackluster 5.15.
Also, the stock is currently a Zacks Rank #3 (Hold). Remember, the Zacks Rank is heavily influenced by earnings estimate revisions, so let’s check out a quick snapshot of the revision activity we have seen for Twitter recently:
Unfortunately, this activity does not paint a very consistent picture. With 80% negative agreement for the current quarter, as well as 83% agreement for the next quarter, it looks like there may be troubles ahead for Twitter. Indeed, the Zacks Consensus Estimate for these two quarters has fallen by 20% and 60%, respectively, over the past 60 days-a signal that analysts are less optimistic about the company’s near-term prospects.
Nevertheless, recent earnings performance has caused full-year estimates to be revised upwards, and there also seems to be a strong positive sentiment regarding the company’s next fiscal year. As we can see, 75% of revisions have been positive for that period, sending the Zacks Consensus Estimate soaring by 25%.
But since this isn’t a definitive snapshot, let’s take a look at the stocks six-month price chart to see if any interesting trends are revealed:
As we can see, this stock seems to quickly break higher or lower when share prices exceed the mid-length moving averages. The first action we see on this chart is a quick break to the downside, and then later, we see a steep jump up that defies any potential resistance. However, as shares slowly slumped following that brief spike, the stock was met with strong resistance along its 25-day moving average line.
Nevertheless, we can see the immediate effects of the positive earnings report in late April. Again, shares displayed a strong forward momentum and quickly broke out above the moving averages. This could be a sign that investors will react hard and fast to Twitter’s earnings announcements.
Finally, I want to highlight a moment that happened in mid-May. As we can see, the 25-day moving average crossed over the 100-day moving average, which is typically considered a strong bullish signal. There was a quick spike in share prices, and the stock reached the highest levels that we see on this chart.
However, that spike didn’t last long. The bullish crossover signal wasn’t necessarily wrong, but it certainly didn’t mark the beginning of a lasting bullish trend for the stock. That’s something to keep in mind as we go forward.
Of course, this is only a small snapshot, and not every trader will subscribe to these types of analysis. If you do indulge in technical trading, it’s important to consider several pieces of data and develop consistent system to use.
Finally, any fundamental and technical analysis will depend on what you-the individual investor-prefers to use.
Want more stock market analysis from this author? Make sure to follow @ Ryan_McQueeney on Twitter!
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.