Twitter, Inc. (NYSE:TWTR) poised to breakout to the upside
Twitter (TWTR) looks to have consolidated its stock price and is poised to breakout to the upside if the company can deliver measurable progress over the next couple of quarters. The company has been growing its revenues and profits over the last year and is about to enter a very favorable period with the pending U.S. Elections kicking off this week when the first Democratic Primary debates are held on Wednesday and Thursday evening.
Like many new tech companies, Twitter had a very favorable IPO, but then the company was unable to live up to the high expectations of Wall Street. Originally the stock traded in a range of the upper $30’s to the upper $40’s and occasionally traded above $50 per share. Then the stock fell back for a couple of years and traded in the $15 to $20 range. The company started to perform better financially and in late 2017 moved back into its original trading range in the $30’s and $40’s. That is because the company finally proved it could monetize its platform and turned profitable. If the company can continue to improve its financial performance it could break out and start trading at a new higher trading range.
The company’s improved performance over the last few quarters can be traced to growth in revenue per subscriber. Below is a chart of the company’s total revenues over the last few quarters:
Twitter has increased its total year over year revenue from the first quarter of 2018 to the first quarter of 2019 by 18%. Total revenues for the first quarter of 2018 were $665 million and grew to $787 million in the first quarter of 2019. Now let’s look at the growth in end users for Twitter:
The company is reporting an 11% year over year growth rate for global subscribers. Global subscriber growth has gone from 120 million in the first quarter of 2018 to 134 million in the first quarter of 2019. At first glance that looks like a 12% growth rate, and not an 11% growth rate. It may be hard to read the fine print in the above slide, but the difference between the total subscriber increase of 14 million and the reported 11 million international subscriber growth number and 2 million U.S. subscriber growth number is due to rounding. The bottom line is Twitter has been able to grow total revenue by 18% while only growing total subscribers by 11%.
The increased revenues per subscriber has had a big impact on GAAP operating profits. Here is a look at Twitter’s GAAP operating profits over the last few quarters:
It is easier to get a more accurate apples to apples comparison using GAAP operating profits rather than using GAAP net income. That is because of the new tax laws and their impact on Twitter’s GAAP net income. Twitter has been able to take non-recurring gains in each of the last four quarters by making changes to its deferred tax assets. All of that noise is removed by using GAAP operating profits. The key for investors is year over year operating profits rose by 25% from the first quarter of 2018 to the first quarter of 2019. The first quarter of 2018 had $75 million in GAAP operating profits and the first quarter of 2019 had $94 million in GAAP operating profits.
Not only is Twitter still growing its subscriber base, but its revenues are growing faster than its subscribers. Furthermore, GAAP operating profits are growing even faster than total revenues. If this trend continues it will make Twitter more and more attractive to Wall Street.
Twitter subscriber and revenue growth is set to get a shot in the arm from the launch of the Presidential Election cycle. The first Democratic Party Primary debates will occur on Wednesday and Thursday of this week. While the debates will feature 20 candidates, there are additional candidates running who didn’t even qualify for the debates. Once the debates start, then the candidate to candidate comparisons will be made over and over again on Twitter. The interest in this election cycle will give Twitter a very good opportunity to increase the number of its subscribers in the U.S.
In addition to a potential increase in the number of subscribers, this election cycle will also give Twitter access to enhanced revenue spending from the candidates and from the numerous outside advocacy groups. These groups will be trying to target potential voters and Twitter’s user data will allow advertisers to zero in on those with significant interest in the election. It will even give political advertisers insights into which way specific subscribers are leaning. As Twitter’s CFO Ned Segal said in the first quarter 2019 earnings press release “We’ve never been more confident in our strategy and execution and see a great opportunity to grow our audience and deliver even more value for advertisers.” Management is confident in the company’s direction. Investors also have ample reason to be more and more confident in Twitter.
The news flow from Twitter for the rest of this year and next year appears set to be very positive. Hence, Twitter looks poised to be on the verge of breaking out to a higher trading range over the next few months. Investors looking to buy Twitter to take advantage of a potential breakout move to the upside need to do their own due diligence.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 35.72.
The projected upper bound is: 38.15.
The projected lower bound is: 31.67.
The projected closing price is: 34.91.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.
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 30.7693. This is not an overbought or oversold reading. The last signal was a buy 0 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 41.53. 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 37 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 -108.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 2 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 sell 9 period(s) ago.
Rex Takasugi – TD Profile
TWITTER INC closed up 0.150 at 34.900. Volume was 46% above average (neutral) and Bollinger Bands were 17% narrower than normal.
Open High Low Close Volume___
34.750 34.990 34.290 34.900 4,410,459
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 35.50 37.27 33.01
Volatility: 27 56 59
Volume: 2,810,347 3,115,913 3,806,056
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 5.7% above its 200-period moving average and is in an downward trend. Volatility is relatively normal 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 bearish on TWTR.N and have had this outlook for the last 29 periods.