Trade-Ideas: Twitter (TWTR) Is Today's

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Twitter ( TWTR) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Twitter as such a stock due to the following factors:

  • TWTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $531.7 million.
  • TWTR has traded 44.8 million shares today.
  • TWTR traded in a range 231.4% of the normal price range with a price range of $1.47.
  • TWTR traded below its daily resistance level (quality: 1 day, meaning that the stock is crossing a resistance level set by the last 1 calendar day. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on TWTR:

Twitter, Inc. operates as a global platform for public self-expression and conversation in real time. Currently there are 11 analysts that rate Twitter a buy, no analysts rate it a sell, and 14 rate it a hold.

The average volume for Twitter has been 20.7 million shares per day over the past 30 days. Twitter has a market cap of $23.5 billion and is part of the technology sector and internet industry. Shares are down 0.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Twitter as a sell. Among the areas we feel are negative, one of the most important has been unimpressive growth in net income over time.

Highlights from the ratings report include:
  • 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.

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