While the S&P 500, Nasdaq and other key U.S. market indices continue to churn through the volatility gauntlet, a surprising equity has shown remarkable resilience: Twitter Inc (NYSE:TWTR). That’s right, TWTR stock continues to not only hold up during the carnage, but it’s actually outperforming the overall market as well.
The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is down 6% in the last five days. TWTR stock is up 20%. So do we buy into this market-beater or is it too late?
Admittedly, investors have had plenty of opportunities to load up on TWTR stock. When we first became fans of it, it was trading near $15 to $16. No, we didn’t catch the bottom near $14. But that’s okay, because it only took about six months for TWTR stock to double from our levels.
I hate to say it, but if you missed Twitter in the teens, then the low-$20s (where we said to buy it again) and even on a break above $25, it might be tough to buy now. You’ll have to choose your entry wisely.
Trading TWTR
Before we get to the fundamentals, let’s look at the chart for a minute. After initially popping higher on better-than-expected earnings, TWTR stock was promptly rejected at $35. Looking at the chart, this is no surprise (black line is resistance).
Initial support could come into play at $30 (first blue line). Only because Twitter stock is displaying so much bullishness in the face of market-wide adversity do I have a bit of faith in this level holding.
However, much stronger support rests at $27. I’m not sure what it would take for TWTR stock to fall to these levels, but should it happen, I would be a confident buyer. Furthermore, while the 50-day moving average is only at $24, it should continue making its way higher.
In fact, the 100-day and 200-day averages are also trending higher. This is a positive development for Twitter stock after years of under-performance. Additionally, these moving averages should act as support should Twitter stock continue grinding higher.
Provided that the business continues to do well, so too should the stock. It’s got wind in its sails.
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Consolidating between $27 and current levels should allow Twitter stock to eventually retest its breakout highs near $35. If we’re long, I want to stay long, as this stock has been a great “hideout” during the selloff.
Sizing Up TWTR Stock
So what exactly sparked Twitter stock to rally from $27 to temporary highs of $35 in one day? The company beat on earnings per share and revenue estimates and had its first-ever GAAP profitable quarter.
Revenue for the quarter grew 2% year-over-year (YoY) and adjusted EBITDA came in $308 million vs. expectations of just $242 million.
I recently reiterated why I do not like Snap Inc (NYSE:SNAP) as an investment and I still believe Twitter has a superior product to Snapchat. Its potential to capitalize on live-streaming video is still there, while the platform serves as an interactive, breaking news feed.
It’s far from perfect of course and the stock was a far better buy at $16 vs. $30. But if management can build on last quarter’s momentum, we could have a winner here.
Perhaps its opening price of $45 on its first day of trading is a potential target down the road. However, not everything is perfect.
While monthly active users of 330 million grew 4% YoY, the figure was flat vs. last quarter and came in below analysts’ estimates of 333 million users. Further, full-year revenue slumped 3%.
So it isn’t perfect, but Twitter has momentum in its business and surprisingly has momentum in its stock. That’s despite the world-is-ending action we’re getting in the SPY.
I would be a buyer in the upper $20s, preferably on a pullback to $27. Otherwise, let’s see how the market pans out this month.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
