Once touted as the social media choice of the next generation, Twitter Inc (NYSE:TWTR) has fallen hard, and fallen fast. The next generation has moved on from microblogging and into social media platforms like Snap Inc’s (NYSE:SNAP) SnapChat and Facebook Inc’s (NASDAQ:FB) Instagram. What’s more, the older generations are still firmly tied to their Facebook pages.
In fact, as Josh Enomoto puts it, “Twitter does not offer a useful platform unless you’re a celebrity, journalist or social media guru.” Twitter has essentially become a glorified RSS feed, one that has seen its ad revenue flowing out to more profitable social media locations. As such, there is currently no compelling reason to own TWTR.
However, for short-term investors and speculative options traders like myself, Twitter stock offers a potentially lucrative opportunity.
TWTR will step onto the earnings stage on Wednesday next week. The consensus is calling for a year-over-year plunge in earnings from 15 cents per share to a penny. What’s more, revenue is seen dropping 13.9% to $511.91 million. For regular Twitter followers, these eroding fundamentals are no surprise.
TWTR Stock’s Earnings Outlook
What would be a surprise to nearly everyone on Wall Street would be an earnings beat. And it’s not such a far-fetched possibility. In fact, EarningsWhispers.com reports that Twitter’s whisper number comes in at 5 cents per share, well above the current consensus. If the company can come anywhere near this figure, and not offer up abysmal guidance, Twitter stock should rally.
As I alluded to above, don’t expect this quarterly report to offer any long-term buying opportunities. The rally I’m looking for is a short-term, knee-jerk reaction for a stock beaten down and mired in bearish sentiment. TWTR is oversold and trading near all-time lows, increasing the likelihood of short-term buying power on any positive news.
Furthermore, expectations are near rock bottom for Twitter stock as well. For instance, Thomson/First Call reports that only four of the 38 analysts following TWTR rate the shares a “buy,” with 13 outright “sell” ratings. Additionally, Twitter stock is trading north of the consensus 12-month price target of $14.05.
In other words, there is plenty of coverage and more than a little wiggle room for target increases or ratings shifts, and Twitter only has to convince one or two analysts to upgrade with next week’s quarterly report.