With Twitter holding its annual meeting on Wednesday, the stock’s price is declining towards 30$ per share after climbing a high of almost 75$ in December 2013. Since then, the microblogging site had a downfall and suffered a big drop in market value, a fact which made some analysts to say that Twitter is a “victim of blind investors and hype”.
At the beginning of February we had the first earnings report since the IPO in November last year and the disappointment was pretty big as the estimate was -0.1$ per share and the earnings came at -1.41$. The bad earnings results corroborated with the stock price, which was pushed to insane levels by investors where no fundamental valuation metrics really applied, determined the shares to lose 15$ in one trading session the day following the earnings reports.
The spring earnings report from the end of April brought a pleasant result for the investors as the earnings were better than the estimates. (-0.22$ vs. -0.26$). Still, the stock’s price continued the downwards momentum and is heading towards the psychological level from 30$.
With the annual meeting from tomorrow looming on the horizon, the Twitter’s CEO will probably try to paint a rosier picture of the actual situation of the microblogging site and that investors should not be worried about the key metrics. This would come in the context that the key reason for Twitter’s decline is its perceived inability to add users at a faster rate.
The annual meeting from tomorrow comes in the context that the key reason for Twitter’s decline is its perceived inability to add users at a faster rate. This is why I think that Twitter’s CEO will probably try to paint a rosier picture of the actual situation of the microblogging site and that investors should not be worried about the key metrics. This would be a lot like the speech he had during Twitter’s first-quarter earnings call last month when he told the analysts: “Let me be clear: I am really happy with engagement in the first quarter. It’s fantastic across a number of dimensions. … I think that the engagement rates we’re seeing are fantastic.”
On the daily chart we can see how the descending channel is in correlation with the investors’ mood on Twitter since the beginning of the year and that for the moment it does not give any signs of a reversal.
On the H4 timeframe there is some hope for a reversal that could come in correlation with a potential upbeat tone from the investors after annual meeting form tomorrow. In order that the reversal to materialize, we would need that an Inverted Head&Shoulders price pattern type to be validated. For now, we only have the left shoulder and the head of the pattern, remaining that the price to draw the right shoulder and then to close above the resistance level from 34$, the final price target being situated at 47$ in a time period of 2-3 weeks.
As a conclusion, I think Twitter could still lose ground and even touch the 30$ level, but I see the momentum to be shifting towards the bulls group and this annual meeting could mark the beginning of an ascending period for Twitter’s stocks.