Twitter Inc Is A Sweet Spot In A Sour Market
Twitter Inc (NYSE: TWTR) shares have been in correction mode right along with the broader market, but the severity of the correction in Twitter has been very palatable for those long of the stock.
For those not yet long of Twitter, the mild nature of the current pullback in the stock is enticing. Is the relative strength of Twitter going to persist, or will the stock give into the current bout of selling pressure permeating the marketplace?
What The Bulls See
- A very strong balance sheet: $2.1 billion in cash versus $201.67 million in debt, a current ratio of 6.65 and a debt to equity ratio of 6.62 percent.
- Explosive revenue and EPS growth estimates for 2015 of 67 percent and 270 percent, respectively.
- Very strong technicals in the form of an uptrending stock that refuses, thus far, to sell-off violently despite the volatile market conditions.
What The Bears See
- Very rich valuations: a price-to-earnings ratio of more than 140, price-to-book of 9.97, price-to-sales of 31.18 and a market capitalization of $30 billion.
- Questions about the company's ability to effectively monetize its massive site traffic.
Technicians love Twitter's trading action. The stock is sporting an uptrend line well below the current stock price of $51.85, and it appears like it just doesn't want to go down, even as the market has been trading bearishly. Twitter looks like it is going through a mild correction with a max downside of $46.88. That level represents the Fibonacci projection for what may be an “abc” downside correction, as well as the possible point where the stock's uptrend line comes into play. As long as that level holds up, Twitter likely will make another run to the upside before too long.
The next major resistance for Twitter comes in at $56.51.
Twitter may certainly drift lower in the short term, especially if the broader market conditions continue to be difficult. The way the stock is trading recently, however, it might be a safe bet to assume the bulls will be buying heavily if or when the stock trades down to support at $46.88.
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