Plenty of Reasons to Sell Twitter

Ed Ponsi

Over the past few days, some of the world's biggest corporations have announced they would temporarily stop advertising on social media platforms. 

On Friday, Coca-Cola said it would pause advertising on all social media platforms for 30 days. Consumer products giant Unilever has discontinued advertising on Facebook, Instagram, and Twitter for the rest of the year. 

Facebook is the focus of the boycott, and many smaller companies, like Ben & Jerry's and Patagonia, have stopped advertising on that social media platform. 

Even though it's drawing most of the boycott heat, I believe Facebook compares favorably to Twitter right now. Here are a few reasons why:

SIZE: Facebook has over 2.6 billion monthly active users, and owns Instagram, which has an additional 1 billion monthly users. Twitter has just 330 million monthly users, or less than one-tenth of the Facebook/Instagram combination.  

CAPITAL: With $52 billion in cash as of December, Facebook is in solid financial condition. Twitter has a net cash position of just $4.1 billion - again, less than one-tenth the size of Facebook. 

COMPETITION: Facebook is by far the biggest player in this space, so it is less susceptible to upstart social media platforms. For example, with just 1.5 million users, rapidly-growing Parler is no threat to Facebook, but could potentially have a negative impact on Twitter. 

Finally, there's the matter of Twitter's chart. 

TWTR

Twitter has fallen out of its bullish channel (dotted lines). That breakdown occurred on high volume, indicating institutional selling. 

Twitter has also fallen beneath its 200 day moving average (red) and 50 day moving average (blue). It's MACD indicator flashed a sell signal in mid-June (red arrow). 

Add it all up, and there are plenty of reasons to avoid Twitter right now. 

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