Twitter Inc (NYSE: TWTR)
Yesterday was an incredibly strong day for Twitter. The stock climbed more than 8% by the close of the day. The reason for the climb was simple – rumors surfaced that an acquisition was in the works. However, as I say all the time, it’s never a good idea to buy into the rumors, and those that did yesterday are sorry today! TWTR is falling like a brick from the empire state building! At this point, the stock has given up all of its gains, and in my opinion, it’s not done falling just yet. Today, we’ll talk about the acquisition rumors that sent Twitter skyrocketing, what we’re seeing from the stock today, and what we can expect to see from TWTR moving forward.
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The Rumor That Sent TWTR Up Yesterday
As mentioned above, TWTR had a great day in the market yesterday. However, there are few things that have the potential to move the needle in the market like expectations of an acquisition. Yesterday, news surfaced that billionaire investor Marc Andreessen had his eye on Twitter. More importantly, he was said to be partnering with the equity firm, Silver Lake, in an attempt to make the acquisition happen. While it was confirmed that Andreessen and Silver Lake were in talks about “some sort of deal”, there was absolutely no confirmation that the deal had anything to do with an acquisition, particularly the acquisition of Twitter. Ultimately, that was all rumors! Nonetheless, those rumors sent TWTR up by around 8% yesterday.
What We’re Seeing From TWTR Today
All too often, I see rumors sparking incredible upward movement. Then, the next day, as no confirmation comes out, the stock tanks and tons of people that played into the rumors lose massive amounts of money. That’s exactly what we’re seeing today. Because the rumors were not confirmed, and probably won’t be for that matter, TWTR is tanking in the market today. At this point, the stock has given up all of the gains we saw as a result of acquisition excitement and still seems to be headed downward. Currently (11:09), TWTR is trading at $16.58 per share after a loss of $1.33 per share or 7.40% so far today.
What We Can Expect To See Moving Forward
Moving forward, I have overwhelmingly bearish expectations with regard to TWTR. First, lets start with the idea of an acquisition… I strongly believe that it would be a very, very bad move to acquire a company like Twitter at the moment. Through MySpace and countless others, we’ve seen what happens when consumers speak in the realm of social media. Buying Twitter would be like buying a cruise ship with a 3 foot radius hole in the bottom of it – the repairs simply aren’t worth making if you’re paying a premium for ownership!
With that said, my bearishness on TWTR is based in fundamentals. The company has been declining in value since shortly after it first appeared on the market. To make matters worse, Twitter has been struggling to drive new users for years. This led to the resignation of Dick Costolo as CEO and the appointment of Jack Dorsey. While Dorsey is a co-founder of the company, he is far from the right man for the job. Dorsey is currently the CEO of two companies, and doesn’t have enough time in the day to focus on TWTR at the moment. As a result, since Dorsey took the lead, we’ve seen little to nothing with regard to changes that would create a better user experience. So naturally, users are still a big problem for Twitter. Until the company creates a solid plan for tackling the user experience issue it’s facing, users are going to continue avoiding signing up for the social network and the stock is going to continue falling. It’s bare bones basic fundamentals my friends. This is one to stay away from!
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What Do You Think?
Where do you think TWTR is headed moving forward and why? Let us know your opinion in the comments below!
[Image Courtesy of Flickr]