Twitter, Inc. (NYSE:TWTR) bulls appear poised to take the stock to the next level
Although it’s a short sample size, Twitter (NYSE: TWTR ) has been underperforming both its peers and the tech sector so far this year. While Twitter stock is up 14.9%, it’s lagging both Facebook (NASDAQ: FB ) and Snap (NYSE: SNAP ). Those two stocks are up 25.4% and 96%, respectively, while the PowerShares QQQ ETF (NASDAQ: QQQ ) is up almost 16% so far on the year.
Given this underperformance, are investors overlooking Twitter stock, particularly when it comes to its balance sheet?
Twitter Stock and Its Balance Sheet
As it stands, Twitter commands a market cap of about $25 billion. After the most recent quarter, Twitter holds about $1.9 billion in cash and has $4.3 billion in short-term investments. Together, that totals about $6.2 billion in cash, making up about one-fifth of the company’s market cap.
The company does have about $900 million of its $1.73 billion in total debt coming due. Even after netting that out though, we’re still talking about net cash of roughly $4.5 billion. That’s surprisingly strong for a company that many investors don’t value very highly.
Breaking it down a bit more, the company’s total current assets of $7.1 billion easily outweigh Twitter’s total current liabilities of $1.5 billion. This gives Twitter a quick ratio of ~4.7, meaning it can very easily meet its short-term obligation.
A quick ratio of 1 would suggest a company can meet its obligations, so having multiples of that figure shows the short-term strength in this business.
Total assets of $10.1 billion are almost three-fold the $3.35 billion Twitter has in total liabilities. That is coupled with the $855 million that Twitter has generated in free cash flow over the trailing 12 months and the financial position gains even more strength. If Twitter stock can maintain this momentum, it will gain even more strength over the coming year.
As it stands, analysts expect Twitter to grow revenue by 14% both this year and next year. Earnings expectations call for flat growth this year and 18% growth next year. Overall, Twitter’s balance sheet should be seen as a notable asset rather than a risky liability.
Twitter may not be Facebook when it comes to the balance sheet, given that the latter has one of the strongest in the market . But it’s definitely better than Snap’s situation . That said, Twitter stock has still underperformed its two peers so far this year. On the flip side, Twitter’s 6% rally over the 12 months bests Snap, which is down about 35%, and Facebook, which is roughly flat over the past year.
On the charts, Twitter has been locked in a fairly wide trading range. While support sometimes comes into play down near $28 and at times near $30, $26 is “ultimate support.” This level was the breakout area in February 2018 and has been very strong support each of the three times TWTR stock has tested it since then. On the upside, Twitter has generated selling interested up near $36.
On Friday, the stock was outperforming the big selloff in the market but ultimately got caught up in the selling. It couldn’t hold onto its potential breakout over the 200-day moving average and downtrend resistance.
I want to see if we get any upside action over the next few days. If bulls can’t bid TWTR stock higher, look for a possible test of $30 should the 50-day fail to buoy the name. Should Twitter stock rally, look to see if it can get above Friday’s highs. If it can, $36 is on the table.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 31.90.
The projected upper bound is: 35.43.
The projected lower bound is: 30.70.
The projected closing price is: 33.06.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 26 white candles and 23 black candles for a net of 3 white candles.
An inverted hammer occurred. If this occurs during a downtrend it implies a reversal. Look for a confirmation of the reversal on the bar.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
A shooting star occurred (a shooting star has a small real body near the bottom of the candle and a long upper shadow). During an uptrend(which appears to be the case with TWITTER INC) the long upper shadow indicates that the bears are gaining control and a top may occur.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 59.5679. This is not an overbought or oversold reading. The last signal was a sell 1 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 61.95. 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 buy 61 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 135.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 11 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 10 period(s) ago.
Rex Takasugi – TD Profile
TWITTER INC closed up 0.470 at 33.060. Volume was 7% below average (neutral) and Bollinger Bands were 40% narrower than normal.
Open High Low Close Volume___
32.980 33.850 32.930 33.060 3,638,920
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 31.98 31.75 33.77
Volatility: 27 47 67
Volume: 3,758,453 3,439,403 4,540,780
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.
TWITTER INC is currently 2.1% below its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of TWTR.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on TWTR.N and have had this outlook for the last 5 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.
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