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Twitter Pulls A Fast One With Q3 Beat

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Twitter Pulls A Fast One With Q3 Beat
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Twitter Inc (NYSE: TWTR) traders were treated to an unfamiliar sight on Thursday after the company delivered a third-quarter earnings beat.

Twitter has a history of post-earnings sell-offs over the past couple of years, but this time the stock’s 11 percent opening jump triggered even more buying (and likely short covering), sending shares higher by 20 percent in mid-day trading.

Big Quarter

This quarter, Twitter appears to have definitively broken from its general pattern of rallying ahead of earnings and then crashing afterward. Twitter reported record profits in the third quarter and added 4 million subscribers on the quarter, leaving bears with little to hold onto for the time being.

While EPS of just 10 cents for a $14.8 billion company and a 4 percent year-over-year decline in revenue is not generally the type of performance that investors can get excited about, many traders had left Twitter for dead after the company languished in the red for years. After repeatedly disappointing the market with its advertising monetization efforts and stagnating user growth, Twitter may finally be showing signs of life in its core business.

Take A Breath

Twitter bulls are enjoying a great day on Thursday, but it’s not like they haven’t been here before. Even after a 17-percent gain, Twitter stock is still down 60.0 percent overall in the past three years.

From a technical standpoint, Twitter has now closed its Q2 earnings gap, when it dropped from above $19.50 to below $17.50. Now that that gap is closed, where Twitter goes from here will be critical. If it continues higher and takes out its July high of $20.88, it could be an extremely bullish development. However, if it heads back lower in coming days, Thursday’s spike to $20 may represent nothing more than the latest in a series of lower highs.

Joel Elconin contributed to this story.

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