If there's any company on Wall Street's hit list, it's Twitter Inc (NYSE: TWTR ). This is an organization that absolutely needs a positive break. With each passing day, however, that appears more and more unlikely for TWTR stock.
Whether you're a technical trader or a fundamental investor, the stats on Twitter stock are undeniably horrid. The critical dilemma is that Twitter does not offer a useful platform unless you're a celebrity, journalist or social media guru.
Unlike Facebook Inc (NASDAQ: FB ), which is a platform for everybody, regular folks have no incentive to tweet into the void.
Still, Twitter stock has a contrarian argument. Those that use it, use it well. It's widely integrated into popular culture and serves as an effective marketing tool for businesses. Most importantly, with TWTR stock down firmly into the "teens," could a contrarian play work here?
Twitter's Ubiquity Is Underrated
For all the criticisms dished out against Twitter - and I'm guilty as charged - we don't appreciate just how important the company has become. To my knowledge, every news outlet has a Twitter account, allowing them to deliver content directly to their viewership. It's the same for any institution of importance. In fact, it's weird if an entity doesn't have an account.
Because of its prevalence, it was only a matter of time before Twitter Inc would become the news. On Thursday, the social media company filed a federal suit against the U.S. Department of Homeland Security. The complaint alleges that Twitter Inc received an unlawful summons regarding information that would expose a vocal critic of President Trump.
Although the impacted parties are declining to comment, the suit comes at a time of heated debates over immigration. Due to the Trump administration's crackdown on illegal aliens, the political vitriol has reached unprecedented levels. From some perspectives, Twitter is regarded as a hero for standing up to a "tyrannical" administration. That said, the impact to TWTR stock was actually negative, with shares falling 1% on the day.
The greater issue is that the lawsuit affirms the importance and relevance of Twitter, and by extension, TWTR stock. If nobody cared about TWTR, the Feds would not have filed a summons. Doing so would simply turn a candle into a forest fire.
In reality, we know that Twitter molds and shapes the young minds of the international community. It's more powerful than a nuclear warhead. For better or for worse, that's the reason why the Trump administration stepped in.
The Price May Be Right for TWTR stock
Considering this enormous leverage, the central criticism is not about whether TWTR stock is a valid investment. What else, besides Alphabet Inc (NASDAQ: GOOG ,NASDAQ: GOOGL ) or Amazon.com, Inc . (NASDAQ: AMZN ), gives you such dominance over a particular sector? Instead, it comes down to the price point.
In the final day of trading in 2013, TWTR stock closed out the year at $63.65. Today, shares trade hands at less than $14.50. Granted, nobody liked Twitter stock at $60, or anywhere within a 500-mile radius … but at current levels, you have to wonder when too much pain is literally too much. Keep in mind that Twitter's all-time closing low is $14.01 and its absolute low is $13.73.
Click to Enlarge Granted, this does not mean that TWTR stock is undervalued against fundamental benchmarks. Furthermore, the problems afflicting Twitter are well-documented. At the same time, they've been well-noted for a lengthy period, yet shares have refused to convincingly break below $14.
I believe what we're seeing is a long-term technical support line. This is where shorting Twitter stock is no longer appealing. Assuming that's the case, speculative traders could make a short-term swing play.
I'm in no way suggesting that TWTR should form the backbone of your portfolio. What I am saying is that most stocks have an equilibrium point where even critics could consider the bullish argument. Seeing just how important Twitter is to everyone, I think TWTR stock finally makes a modest amount of sense.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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