Tuesday, February 12, 2019

Twitter: A Never Ending Struggle


Twitter Inc. (NASDAQ: TWTR) posted stronger-than-expected fourth quarter earnings Thursday, but the stock closed down 9.84% to $30.80 on a weak Q1 revenue outlook. The social media company said earnings for the three months ending in December came in a 31 cents per share, rising 63% from last year and exceeding the forecast of 25 cents per share. Group revenues rose to $909 million and again beat the consensus forecast of $868 million.

For the first quarter of 2019, Twitter expects total revenue to be between $715 million and $775 million (compared with the Wall Street consensus estimate of $762 million), with operating income of $5-35 million. In addition, the company said it expects full-year 2019 operating expenses to be up 20% year-over-year as it increases investment in areas including improving safety and eliminating spam and other bad actors, as well as product, sales and platform. That disappointed investors, with Twitter’s stock dropping as much as 10%.

One of Twitter’s biggest problems has been dealing with spams and abusive behavior on the platform. The company’s CEO Jack Dorsey made sure that the platform’s “health” is the No. 1 priority for Twitter. The company touted a 16% decrease in abuse reports last year from users “who had an interaction with their alleged abuser on Twitter.”

In 2019, the company said, it will take “a more proactive approach to reducing abuse and its effects on Twitter, with the goal of reducing the burden on victims of abuse and, where possible, taking action before abuse is reported.” It’s also planning to beef up login and sign-up processes to make it “more challenging for bad actors to take advantage of accounts for abusive or malicious purposes.”

This state of uncertainty took a toll on investors' positive pre-earnings sentiment, as the report showed that the company is still struggling with a number of issues. Ever since the company went public back in November 2013, Twitter failed to fulfill investors’ expectations. The long-term chart is the perfect representation of the overall state of a company and its investors’ sentiment. Since December 2013, when the stock printed the all-time high 74.73, we can notice how price couldn’t reach that level ever again, in fact it kept printing lower-lows throughout the years and established a strong downtrend that the bulls couldn’t get out from yet.

In the medium-term, the stock is stuck between two levels: the 36 resistance and 27 support and we need to see a break towards either side to confirm the next possible trajectory. A break above 36 could possibly take price to retest the 47 pivot resistance. On the other hand, if the bulls lose the 27 support, then a retest of the all-time low 14 level will be a very likely scenario.