Will You Be Ready When Twitter Inc Stock Surges on a Breakout?

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Is some of Jack Dorsey's magic at Square Inc (NYSE: SQ ) rubbing off on Twitter Inc (NYSE: TWTR ) now? Dorsey, who serves as CEO for both companies, has seen great success at the former and has struggled with the latter. However, the tide has been turning for the TWTR stock price, and it looks like even more gains are heading its way.

Once all the rage on Wall Street, TWTR stock fell out of favor with investors once its revenue and user growth dried up. When those catalysts were gone - and its previous management was unable to fix them - the stock began cascading lower. After trading over $65 per share, the TWTR stock price fell below $15 just earlier this year.

About a year ago, M&A rumors began circulating, involving names like Walt Disney Co (NYSE: DIS ) and salesforce.com, inc. (NYSE: CRM ). While some may think it's crazy, I actually believe TWTR stock could still be an acquisition target if it cleans up a few issues.

The platform serves as the standard in breaking news. As it makes further headway in live streaming and video, it could become more of a media beacon than people realize.

Where to Go From Here?

Building on that video momentum, Twitter will now run a 24-hour Bloomberg segment called "TicToc." In addition , the company said engagement is on the rise since it doubled the character limit per tweet.

Retweets, likes and increased followers are some of the results management has seen. Higher engagement is good, particularly when it comes to selling ads, and could help bring in more users. Even if new users aren't the end result, a more engaged current user is certainly good news.

The announcements follow the company's Oct. 26 earnings report, where Twitter beat on earnings per share and revenue expectations. EBITDA was up along with margins, while user growth beat analysts' expectations. GAAP profitability could come in the fourth quarter if management hits the higher end of its guidance.

When engagement and user growth are moving in the right direction, the platform becomes more attractive to advertisers. When more advertisers come to Twitter, the company gains pricing power and the ability to strategically place more ads.

All of a sudden, Twitter as a business is looking more attractive. From a product-platform standpoint, it still has further to go, but it's moving in the right direction.

Trading TWTR Stock

We've got two charts to look at here, one long-term and one short-term chart. The long-term one shows a break above $21, which has been resistance since support gave way in January 2016.

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The one time the TWTR stock price was able to climb above $21 came in 2016 on M&A rumors. Now that the stock is again above this level, it serves two purposes. First, investors can look for more upside to the $24-$25 level and possibly above. Second, they can use a close below $21 as their stop-loss in order to mitigate losses.

On the short-term chart, we can see that the TWTR stock price has been trending higher. After starting a trading channel in May, TWTR stock broke below support in August.

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In late October, shares reentered the channel and continue to trade within a well-defined range. A breakout over $22.50 should ignite shares even higher.

The Bottom Line on TWTR Stock

Despite the big rally over the past few months, more gains look to be on the way. I would opt for Twitter over Snap Inc (NYSE: SNAP ), a stock we flagged with bullish trade prospects, but less-than-stellar fundamentals . For that reason, despite the trading potential, I am not buying SNAP.

Facebook, Inc. (NASDAQ: FB ), on the other hand, is a best-in-breed company . And not just in social media, in all of tech.

So if investors are buying for strong fundamentals, go with Facebook . For a company with improving fundamentals merging with a bullish technical outlook, go with Twitter. But make no mistake about it, Twitter is far from perfect. Its revenue and earnings situation isn't great, and investing now (vs. trading) is predicated on the fact that these trends continue to improve.

I don't think of Twitter as a long-term buy-and-hold - at least not yet. After labeling TWTR stock as a trade-first, investment-second setup, I'm sticking with that call. For now, the risk/reward makes sense as a trade. If the fundamentals continue to improve, TWTR stock can become a long-term investment.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell . As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.

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The post Will You Be Ready When Twitter Inc Stock Surges on a Breakout? appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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