On Monday, Twitter Inc (NYSE:TWTR) caught a 4.5% lift on news of its new video partnerships. That rally is continuing into the week. Is this just the beginning for Twitter stock as it’s heading to $40, up some 32%?
In late summer, we turned bullish on Twitter, as the platform simply had too much potential. While Twitter was the unproud owner of stagnant revenue growth, lacking profitability and sluggish user growth, its platform still had promise.
It’s used by everyone from athletes to Presidents to instantly reach their followers. It’s also used as a breaking news outlet and as a collaborative real-time discussion platform during live events.
While management hadn’t found a way to consistently tap into these opportunities, they were still there. That led to a rally from $15 to more than $30 in less than a year. But the latest developments show that management does know what it’s doing and therefore, more gains could be on the way.
Twitter, Disney and Video Streaming
“The Walt Disney Company (TWDC) and Twitter today announced a new agreement to create live content and advertising opportunities from across the entire Disney portfolio on the Twitter platform.”
That’s the opening line in a press release from Walt Disney Co (NYSE:DIS), which is now working with Twitter on live video content. It’s not just Disney though. Twitter now has a 24-hour streaming news partnership with Bloomberg, along with deals with the PGA, WNBA, Vox Media, BuzzFeed and Viacom, Inc. (NASDAQ:VIA).
I personally think that’s a great strategy for Twitter. The company needs to find a way to attract users to the platform and just as important, needs to keep them there once they come.
The longer they’re on, the better engagement numbers Twitter has and the more leverage they have with advertisers. Because Twitter is such a great platform for breaking news, instant commentary and popular opinions, it only makes sense to utilize more media.
Last quarter, Twitter reported 3% growth in its monthly active users to 336 million, while daily active users grew 10%. With 336 million monthly users and accelerating growth in daily activity, Twitter is clearly an attractive platform for Disney.
In fact, I’ve made the case in the past that because of Disney’s strong live-content portfolio and Twitter’s potential, an acquisition of Twitter wouldn’t be the worst decision in the world.
Twitter stock is a great option for Disney, particularly given its stake in Hulu, which could grow to 60% if it acquires key assets from Twenty-First Century Fox Inc. (NASDAQ:FOX, NASDAQ:FOXA).
With more content coming from a potential Fox deal, the Twitter platform could be even more crucial to Disney. Because let’s be honest, Hulu won’t catch Netflix, Inc. (NASDAQ:NFLX) and it’s unlikely Disney’s upcoming streaming platforms will either.
Trading Twitter Stock
The fact that Disney and Twitter are working together comes as little surprise. Especially given that, until January of this year, Twitter CEO Jack Dorsey served on Disney’s board of directors. In any regard though, the news is giving a boost to the stock.
Now approaching the 50-day moving average and possible resistance near $32, Twitter stock will need to show some strength to move above this level. It helps that Snap Inc (NYSE:SNAP) (to no surprise at all) reported a poor earnings report and is plunging as a result.
That leaves just Twitter stock and Facebook Inc (NASDAQ:FB) as go-to names in the social media space.
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Since February, Twitter stock has been chopping in a fairly wide range between $27 and $37. We were buyers on a pullback to $27, but investors had to be quick to get it. There are now two ways bulls can play. They can either buy a breakout over $32 or on a pullback to trend-line support near $29. That’s where shares should also find support from the 100-day moving average.
Should $29 give way, $27 could be back on the table. Should Twitter stock break out over $32, the $34 level would be in target. From there, the prior highs near $37 and possibly a run to $40 sometime this year could be possible.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held a position in DIS.
