To receive further updates on this Twitter Inc (NYSE:TWTR) trade as well as an alert when it’s time to take profits, sign up for a risk-free trial of SlingShot Trader today.
Today, we are opening a new bullish trade on Twitter Inc (NYSE:TWTR). While many stocks have been languishing or selling off during the second quarter of 2018, TWTR has been one of the few stocks on Wall Street that has gone on to set new 52-week highs, climbing as high as $47.79 in mid-June. This bullish run has been driven by growing anticipation that the company is finally starting to both unlock its ad-revenue-generating potential and expand its reach with an increasing number of new users.
One of the key metrics analysts watch with TWTR is average revenue per user (ARPU). TWTR’s ARPU has been hit-and-miss during the past few years. During 2016, ARPU was above $8. Unfortunately, that number fell below $7.50 during 2017. However, analysts are forecasting that the changes TWTR is currently making with its video ads and other services could bring 2018’s ARPU back up to just under $8. This improvement in ARPU, coupled with an increase in the total number of users — both domestic and international, thanks to increased user engagement in political news and large global sporting events, like the World Cup — should continue to improve TWTR’s revenue and earnings growth trends. TWTR is also reorganizing its upper management to become better able to implement changes and better manage the company’s current initiatives.
Since reaching its 52-week high in mid-June, TWTR has been consolidating in a slightly down-trending channel. We expect this channel to ultimately become a “bullish flag” continuation pattern when the stock breaks above the down-trending resistance level that has been interacting with it during the past two weeks. The breakout will be confirmed if TWTR can break, and close, above $45 — a move we expect to happen within the next week, or so. We expect the stock to climb back up to its recent high just above $47.50 in the short term, and it may even climb up toward $53 in the run up to the company’s earnings announcement on July 27, before market open. This bullish price movement in the stock, coupled with an anticipated rise in implied volatility, should provide a nice profit in this trade.
Buy to open the TWTR August 17th $46 Call (TWTR180817C00046000) for a maximum price of $3.30.
Follow our Facebook page to receive each Trade of the Day direct to your News Feed — and join the conversation.
You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.
