Twitter, Inc. (NYSE:TWTR) ad business troubling sign for investors

Twitter, Inc. (NYSE:TWTR) ad business troubling sign for investors

Twitter, Inc. (NYSE:TWTR) ad business troubling sign for investors

Twitter (NYSE: TWTR ) ran an experiment last month, showing some users more ads than they would typically see. People did not like the change.

Users seeing more ads than normal reported the quality of the advertisements in their feed was well below average, even scammy, as BuzzFeed News put it. Twitter’s failure to surface relevant and quality ads for its users as it increases its ad load is indicative of how far behind its ad business is compared with bigger competitors like Facebook (NASDAQ: FB) .

It’s also a troubling sign for investors looking for continued revenue growth, since ads are Twitter’s main source of revenue.

“Demand constrained”

Twitter CFO Ned Segal has repeatedly told investors the company has plenty of room to increase ad load.

“We continue to be more demand constrained than supply constrained when we look across the surface areas across 

geographies across times of year,” Segal said at the J.P. Morgan Global Technology, Media and Communications Conference last month. He has also said some iteration of that sentence at every investors’ conference and earnings call for the past two years or so.

Twitter’s ad-load experiment has never made that statement clearer. There’s not enough quality ads for Twitter to show its users if it increases its ad load.

That may be, in part, due to the slashes management made to the company’s sales team a few years ago. Twitter laid off 9% of its workforce, mostly focused on ad sales, in October 2016. It’s really hard to attract new quality advertisers without a sales team.

If Twitter could attract more quality advertisers by increasing its sales force, it would behoove management to ramp up investments in sales. While sales and marketing expenses increased 16% year over year last quarter, Twitter seems to suffer from a lack of interest in its platform from advertisers. That could be the result of Twitter’s smaller audience or potentially lower return on investment compared with competitors. That would indicate much more of a structural problem with Twitter’s ad business than merely needing a bigger sales team to attract more advertisers.

Overall, the bias in prices is: Upwards.

The projected upper bound is: 39.79.

The projected lower bound is: 33.53.

The projected closing price is: 36.66.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.

An engulfing bullish line occurred (where a white candle’s real body completely contains the previous black candle’s real body). The engulfing bullish pattern is bullish during a downtrend (which appears to be the case with TWITTER INC). It then signifies that the momentum may be shifting from the bears to the bulls.

If the engulfing bullish pattern occurs during an uptrend, it may be a last engulfing top which indicates a top. The test to see if this is the case is if the next candle closes below the top of the current (white) candle’s real body.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 72.3158. This is not an overbought or oversold reading. The last signal was a buy 2 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.13. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 21 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -53. This is not a topping or bottoming area. The last signal was a buy 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 20 period(s) ago.

Rex Takasugi – TD Profile

TWITTER INC closed up 0.260 at 36.590. Volume was 44% below average (neutral) and Bollinger Bands were 23% narrower than normal.

Open High Low Close Volume___
36.230 36.740 35.961 36.590 1,831,411

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 36.58 36.63 32.80
Volatility: 51 54 60
Volume: 2,715,409 3,017,826 3,910,757

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

TWITTER INC is currently 11.6% above its 200-period moving average and is in an downward trend. Volatility is Our volume indicators reflect volume flowing into and out of TWTR.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on TWTR.N and have had this outlook for the last 13 periods.

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