Twitter (TWTR), a Big, Liquid Stock that Surged on Earnings

November 3, 2017

Twitter (TWTR) exploded 18.5% last Thursday on volume that was eight times average following the company’s earnings announcement.

What I like: TWTR is a big, liquid stock that surged on earnings—and importantly, soared again the following day (last Friday), when it rose another 7% on four times average volume, driving the stock to its highest level since October 2016. On its weekly chart, TWTR has been attempting to build a bottom for 20 months (since February 2016), so there could be a nice foundation to work off. And, fundamentally, I’ve always believed Twitter had a unique and potentially revolutionary service.

Any potential problems? In a word, management. Despite a unique product, they’ve struggled to attract users and grow the business. Maybe the market is sniffing out a return to growth, but in Q3, Twitter’s revenues actually shrank 4% and earnings were up just 11% while users rose 4%. Even next year, analysts see earnings up just 13%.

My take: TWTR’s earnings gap seems like a classic high risk/high reward situation—I don’t consider it a real leader, but in a bull market, these big bottoms can often lead to big moves. This might be a stock to consider starting in small (with a stop near 19) and buying more down the road if shares move higher.

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Forever Stocks to Buy in 2017: Twitter (TWTR)

05One of the best forever stocks I’ve recommended over the years was Tesla (TSLA).

When I originally recommended Tesla back in late 2011, the stock was trading at 29, and most people hadn’t ever heard of the company.

Today, TSLA is trading north of 300 (which means readers who followed my advice are sitting on profits of over 900%) and almost everyone knows the name Tesla.

And, because I think the company still has great potential, I’m holding tight to my shares. Tesla is one stock I plan to hold forever.

But my message for you today isn’t that you should buy Tesla today. The fact is that, despite what I believe to be a great future, the stock is relatively well respected today, as opposed to 2011.

No, I want to help you buy the next Tesla, so that you too can own a stock with such big profits that you can plan to hold it forever, too.

How to Find Forever Stocks

The simplest way to find a stock you can hold forever is to look at a list of blue-chip stocks, like Johnson & Johnson (JNJ), DuPont (DD), Coca-Cola (KO) and Nike (NKE). Those are the stocks to own if you’re a conservative investor working to keep your wealth.

But my goal is to identify stocks that can make you rich!

I want to identify the next (AMZN), the next Apple (AAPL), the next Alphabet (GOOG) and the next Tesla (TSLA)—and get my readers on board these stocks when they’re still small and fast-growing.

The key attributes I look for to find these stocks are these:

  1. A product or service or business model that is revolutionary.
  1. A product or service or business that serves a mass market.
  1. A company that’s still small enough to grow rapidly.
  1. A company that is not respected—perhaps not even known—by the majority of investors.
  1. Last but not least, I look for a chart that shows that other investors have begun to recognize the company’s potential as well; that tells me that my thinking is on the right track.

For the record, stock #1 in this forever stocks series was Autohome (ATHM), the Chinese company working to be the center of all consumer-oriented automobile information in China.

Forever Stock #2 was Zillow (Z), the world’s largest online organizer of real estate information.

And Forever Stock #3 is: Twitter (TWTR).

Twitter is very well known today, not least because President Trump is a frequent user.

But the stock has not done well in its brief life, and that’s part of the reason I think it has the potential to be a big winner, and eventually a Forever Stock. The fact that the stock hasn’t done well means you can buy it low now.

Running down my checklist, here’s what I see in Twitter.

  1. The company provides a revolutionary service. Tweeting is equally as revolutionary as previous advances in communications: text messaging, email, the fax machine, the telephone and the telegraph. Some of those inventions made companies rich (the telephone), and some didn’t (the fax), and a key differentiator is the presence or absence of a barrier to entry. Clearly, Twitter’s leadership is a big (though not unassailable) barrier to entry.
  1. The company serves a mass market. Obviously.
  1. The company is still small enough to grow rapidly. Twitter brought in $2.5 billion in 2016, a gain of 14% from the year before. Growth has slowed recently, but the number of users keeps climbing (Daily Average Users in the first quarter were up 14% from the year before), and as Twitter learns to monetize those users (via ads and premium services and data licensing), I believe its fortunes will grow.
  1. The company is not respected by investors. That’s clear from the stock’s chart. Twitter came public in late 2013 at 26, peaked soon after at 75, and then fell all the way to 14 in April 2016, as slowing growth disappointed analysts. TWTR did rally to a high of 25 in September, but lost support again, falling right back to its year-earlier bottom at 14 in April 2017.
  1. Investors are beginning to recognize the stock’s potential. When TWTR’s decline stopped at 14 this April, it sent a clear message; that level now represented support. And since then, TWTR has rallied to 18 and held its gains. In fact, for the past month, the stock has been building a nice base. This is now a constructive pattern, and confirmation that forward-looking, patient investors are climbing on board.

Maybe you should be one of them?

Even better, though, would be to become a regular reader of Mike Cintolo’s Cabot Top Ten Trader. Every weekMike researches 10 hot stocks and sends to your inbox every Monday. Thanks to Top Ten Trdaer, our readers were able to grab 900% gains in Tesla, 260% gains in Nvidia, 303% gains in Vipshop Holdings, just to name a few.

Don’t wait. Learn more here.

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Is This Stock a New Nasdaq Liquid Leader?

By Michael Cintolo, Chief Analyst of Cabot Market Letter and Cabot Top Ten Trader

Originally from Cabot Wealth Advisory 2/26/15

“Twitter is a one-of-a-kind company with a one-of-a-kind service that’s producing rapid (nearly triple-digit) revenue growth and skyrocketing earnings as the firm monetizes its base of 288 million users. Throw in tremendous trading volume, which allows institutional investors to buy and sell freely, and that’s why Twitter has surged recently—stocks with all of these sterling characteristics don’t grow on trees. The company’s fourth-quarter report was very strong: timeline views grew a solid 23% from the prior year (to 182 billion!), and thanks to myriad new and innovative advertising products and initiatives, ad sales per timeline view surged 60%. The only remaining worry here is whether Twitter’s user base has topped out (it actually fell a few million from the prior quarter), which would obviously limit future growth. But management said the December drop in users was mainly from an update in Apple’s software (i.e., a one-time event) and that user growth should resume in the quarters to come. Yes, the valuation is high, but the top brass has already guided to a huge 2015 (revenues up 65%, and even that is likely conservative), and despite the recent growth, Twitter’s users are being monetized significantly less than users on Facebook and other social media, so there’s plenty of room for growth. It’s a big story and a potential liquid leader.”

My only hesitation with TWTR is that there’s a good chunk of resistance in the 50 to 52 area. Still, I think a small position (maybe half or two-thirds what you normally buy, dollar-wise) somewhere in the 46 to 49 area can work, with a loose stop near 42 and with the idea of adding more should you develop a profit.

Twitter (TWTR): Disruptive Stock Number Three

By Timothy Lutts, Chief Analyst, Cabot Stock of the Month
From Cabot Wealth Advisory 1/13/14 Sign up for Cabot Wealth Advisory—it’s free!

It’s time for my third installment of “Best Disruptive Stocks.”

Ideally, these are companies that address a mass market, and thus have the potential to impact our lives for the better.

Ideally, these are companies that are young and not yet well known or well respected. Thus they have the potential for increased perception by investors as time goes by.

Ideally, these stocks are young and not widely owned. Thus they have the potential to be bought by more investors—especially institutions—and thus see their stocks soar over time.

All the Cabot editors have made contributions to this list of 10, and the stocks are presented in no particular order, though I am trying to feature them when they’re at good entry points. I hope you enjoy them.

Disruptive Stock Number Three: Twitter (TWTR)

Twitter is one of the 10-most-visited websites worldwide—pretty good for a company that was born less than eight years ago.

Using its software, more than 200 million users send more than 400 million tweets per day—each limited to 140 characters—for free!

And what do these tweets say? Well, most of them might be termed inconsequential, but that’s a value judgment. The indisputable fact is that the business has grown rapidly every year since its launch and there’s no end in sight, particularly with the economic growth that’s expected in China.

The Twitter accounts with the most followers belong to Katy Perry, Justin Bieber, Lady Gaga, Barack Obama, YouTube and Taylor Swift. But anyone can get a Twitter account, and start sending messages into the ether, hoping someone will listen.

(If you want to receive some investing tweets, you can follow me @Timothy_Lutts (though I don’t tweet much) or @MikeCintolo (he tweets more) or our company tweeter @IconoInvestor.

Twitter has also proved very useful at organizing people around social and political issues like the Arab Spring movements and the Occupy movement here in the U.S. The Boston Police Department used Twitter to announce they’d caught the Boston Marathon bomber.

In sum, Twitter is massively disruptive because it’s a free medium of communication with minimal barriers to the user, and it allows organization and leadership of people around shared ideas.

So how does Twitter make money? Just like Google, through advertising, known as promoted tweets, promoted trends and promoted accounts.

In 2010, Twitter’s revenues were $28 million. In 2011, they were $106 million. And in 2012, they were $317 million. 2013, for which we’ll get final numbers on February 5, should total about $620 million. That’s great growth!

The company has not managed to post a profit yet; it’s been too busy growing. But as investment slows down and advertising grows, the potential for earnings is quite large, with profit margins easily above 20%.

What’s most revealing to me today is the chart.

Twitter (TWTR) came public on November 7, just over eight weeks ago.

The price charts shows three weeks of slightly down action, building a short base, and then a very strong advance through December. The whole market was rising then, of course, but a glance at the Relative Performance Line reveals that TWTR was climbing much faster than the broad market, and that’s a great sign.

Since peaking on December 26 at 75, the stock has pulled back normally, and looks to be settling in to support at 55, which might mark a great entry point.

So, you could simply invest in Twitter right here. But if you did, you’d be on your own and there’s a good possibility that some heavy volatility would bring some “uncomfortable” times.

So what I recommend is that you become a regular reader of Cabot Top Ten Trader, which is your source of the hottest growth stocks, and where you’ll not only get expert buying advice on stocks like TWTR—you’ll also get selling advice when it’s time to move on. Take a look here!

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