Twitter Inc (TWTR)’S Downward Trend Justifies Going ‘Long’

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As Twitter Inc (NYSE:TWTR) closed below $37 for the first time on Wednesday, 10th December, 2014, analysts could not help putting the stock under the scanner, considering that it has tumbled by over 30% during as short a time-frame as the last three months. At the end of the trading session, the stock was poised at $36.35, the lowest point since 21st July, thus causing investors to dispose it in a bid to cut losses.

In spite of good second quarter results, the company’s third quarter results fell short of the mark and this is cited as one of the reasons. However, there are other factors at play in this case and Larry Darrell sums up what might be causing Twitter Inc (NYSE:TWTR) to fall through the following observation –

“However, low engagement is not the only factor nipping at the heels of the social media giant. Based on conversion figures, Facebook Inc (NASDAQ:FB) is making slower progress than Twitter but is effectively growing much faster than the latter in terms of raw signups. With 280 million active registered users, Twitter was expected to grow faster or at least match Facebook’s user base of more than 1.3 billion active users.”

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Herb Greenberg put the question on to the panel of Fast Money Traders on CNBC and it sparked a debate amongst the analysts as to whether Twitter Inc (NYSE:TWTR) was worth a bet. The most obvious comparison was with Instagram, which had been taken over by Facebook in 2012 and has now overtaken Twitter in terms of user base.

There is support for Twitter too in terms of being a user friendly platform, easy to use, open to customization and holding universal appeal but overall the sentiment was that it had failed to live up to the market’s expectations. Therefore, from an investors’ perspective, Twitter Inc (NYSE:TWTR) is an ideal candidate for taking a long position.

This article has been written by Vinita Basu.

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