Twitter (TWTR) Stock is the 'Chart of the Day'

NEW YORK (TheStreet) -- Shares of Twitter (TWTR) were falling 0.5% to $36.80 early Thursday afternoon following investor Chris Sacca's note about changes he wants to see for the social network.

Sacca's suggestions include a focus on live events which Sacca believes Twitter can do better than other competitor social networks. "Everything that is happening is happening on Twitter," Sacca wrote. "Every game, every show, every debate, every war, every storm, every ceremony, every tragedy, every election."

Sacca also suggested that Twitter improve the experience for logged-out users visiting the service's website.

On Thursday morning analyst firm Evercore ISI downgraded Twitter to 'hold' from 'buy.' The analyst firm also lowered its price target for the social network company to $39 from $49, citing conservative long-term growth prospects and a lack of visbility regarding user growth.

Insight from TheStreet's Research Team:

Bryan Ashenberg and Bob Lang have identified Twitter as theTrifectaStocks.com Chart of the Day. Here is what Ashenberg and Lang had to say about the stock's chart:

The massive drop in Twitter's (TWTR:NYSE) stock following earnings in late April continues to this day, although it's less exaggerated. The shock from the earnings miss was like a massive earthquake and each day following is a small aftershock -- reminders the downside move is not over yet.

Momentum cuts both ways, and in a bull market, it is much easier to find many strong uptrends and stocks that follow through. As it relates to Twitter, the opposite holds true, and we can see that bearish momentum clearly on the chart.

 

Click here for a larger chart

We see the stock trapped in a very wide range (about 23 points) and with little movement or chance to get a lift. One would think that with the lower prices there might be interest, but we see very little volume down here. The Moving Average Convergence Divergence sell signal is clearly in place.

But Twitter may have bottomed and could rest and base for a while.

 

Click here for a chart

The daily chart is not much better, but yesterday we saw a bit of daylight in the price action, along with some decent flow in options. The reversal today accompanies the selling in the market, (no surprise there) but with some buyers pushing the stock early above $37 it was exhibiting some good Relative Strength, something not seen recently.

Overall, the stock chart is mired in a very tough downtrend and is still quite bearish until the technicals improve, but we could see some short term trading opportunities arise at any time, given the popularity in momentum-driven names. Twitter is at the top of everyone's list.

Separately, Twitter is a holding of Jim Cramer's charitable trust, Action Alerts PLUS. AAP recently lowered their target on TWTR to $45 from $52 on more muted expectations in the near-term.

DISCLOSURE: Trifecta Stocks has no position in TWTR. This Alert is a technical analysis of the company's chart, and we are not taking any action in the stock at this time.

-Bryan Ashenberg and Bob Lang, "Chart of the Day: TWTR," originally published 6/4/2015 on TrifectaStocks.com

Separately, TheStreet Ratings team rates TWITTER INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate TWITTER INC (TWTR) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been unimpressive growth in net income over time."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Internet Software & Services industry average. The net income has decreased by 22.7% when compared to the same quarter one year ago, dropping from -$132.36 million to -$162.44 million.
  • Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • TWITTER INC's earnings per share declined by 8.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TWITTER INC continued to lose money by earning -$0.96 versus -$1.05 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus -$0.96).
  • Despite currently having a low debt-to-equity ratio of 0.43, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 10.08 is very high and demonstrates very strong liquidity.
  • Compared to other companies in the Internet Software & Services industry and the overall market, TWITTER INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: TWTR Ratings Report

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