When it comes to Wall Street, it seems that Twitter (TWTR) has developed an anti-gravity technology. Yesterday TWTR stock soared by 5.8% to $51.99 — then a new high. And shares of Twitter stock are up another 3% today, to over $53.
This compares to the $26 offering price for the Twitter IPO, which was launched in November 6. Interestingly enough, TWTR stock has made other social operators, like Facebook (FB), LinkedIn (LNKD) and Yelp (YELP), look like laggards.
So the follow-up question is obvious: Can anything stop TWTR?
Why TWTR Stock Keeps Climbing
To start, there are some technical reasons for the nice move in TWTR stock. Keep in mind that the company issued only 70 million shares and insiders will not have the ability to unload their positions until February. So with a fairly tight float, it does not take too buying much to pump up shares of TWTR.
Another technical factor for Twitter stock is the dreaded short squeeze. While there is not much data on the short interest, it’s probably a good bet that some investors saw an opportunity to make a quick hit on TWTR stock because of the outsized valuation and tepid Wall Street ratings. Of the analysts from 24 underwriters on the deal, there were only 9 buy ratings. In fact, there were even five “sell” recommendations.
But shorting an IPO like TWTR can be a dangerous game. After all, as short sellers cover their positions, they need to buy back stock, which provides further fuel on the upside.
Plus, there were some fundamental reasons for the big move in TWTR stock as well. Perhaps the most important came last week when Twitter announced a new program called Tailored Audiences. It allows for better targeting by using data from cookies and email addresses. By boosting the relevancy of the ads, there should be an extra boost to revenues.
TWTR is also making strides in improving the user experience. To this end, the company recently introduced a feature to allow photos in direct messages. This is crucial, as Twitter needs to find ways to fend off rival services like Line, SnapChat and WhatsApp.
What’s more, TWTR has launched a text-only version of its platform. Seems a bit like a throwback? Well, keep in mind that huge numbers of phone users — especially in emerging markets — still have feature phones or low-powered smartphones. So the move is a smart way for Twitter to grab more users. Consider that this has been a successful strategy for FB.
Despite all this, TWTR stock is still trading a nose-bleed 53 times sales, which compares to only 18X for Facebook and 20X for LinkedIn. So if there is even a slight miss on earnings expectations, the results can be pretty bad.
But in the meantime, it looks like investors are willing to take the risk on TWTR.
More on TWTR Stock
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.