Yes, I like Twitter (TWTR). Just for the record, yes, I was the same guy who warned investors back on Jan. 2 that Twitter stock was overvalued and due for major pullback.
I also was the same guy who suggested back on April 30 that TWTR — even after the 38% pullback since my Jan. 2 warning — had still not hit bottom. Sure enough, Twitter stock has fallen another 16% since my second caution, spurred by slowing growth and then the end of the lockup period.
But I didn’t write this to gloat (too much). No, I’m revisiting TWTR today to let you know I’ve come full circle, and am now bullish on Twitter stock.
I might have hated Twitter at $67 per share, but at $31, I’m changing my tune.
Don’t get the wrong idea. I still believe Twitter has a boatload of long-term growth challenges ahead of it; these hurdles are ultimately rooted in the company’s flawed assumption about just how well the microblogging platform can get and keep people interested. But I also believe last quarter’s slowdown — and investors’ protest of that slowdown — was something of a wake-up call that should finally effect some needed tweaks of the company’s primary product.
That’s only one of three reasons why I’d be willing to wade into a long position on TWTR stock at its current price, however.
Tuesday Was a Capitulatory Day for Twitter Stock
Ever heard the cliche about things looking darkest right before dawn? It’s true more often than not, even in the stock market.
And with Tuesday’s 18% post-lockup plunge coming on the heels of a 41% pullback over the thirteen weeks prior to the one-day plunge, there’s no way to deny that Twitter walked right into a “from bad to worse to plain awful” situation.
The upside to that strong selloff is, anybody who wanted out has likely gotten out of their position by now, leaving only the diehards — the folks who aren’t going to sell no matter what — in their Twitter trade.
From here, even if they trickle in slowly, the interested market is mostly made up of would-be TWTR buyers.
The clue that puts the finishing touches on the notion that the last of the weak holders are now out is Tuesday’s enormous spike in volume. We saw 134 million shares of Twitter stock trade hands that day — roughly seven times the norm.
The Market Now Collectively, Almost Universally, Hates Twitter Now
Yes, I’m a contrarian at heart, but only because being a contrarian is enormously fruitful.