Stock of the week - Twitter (08.04.2021)

Twitter (TWTR.US) has been drawing less attention since Donald Trump was banned from the social media platform. Nevertheless, the company's business did not experience a havoc following removal of the former US president from its user base as some feared. Moreover, Twitter has released upbeat forecasts a month ago and engaged in M&A discussions recently. 

Trump effect

Some can view Twitter as an opponent of the former US president Donald Trump. Social media company has labelled Trump's tweets as misleading numerous times and has ultimately resorted to banning Trump from Twitter altogether. Nevertheless, it is hard to question the positive impact of Trump's presidency on Twitter. While there is no data on how many new users Twitter has attracted thanks to Trump, the fact that Twitter was Trump's go-to social media platform for announcing any kind of news has likely attracted new users. After Trump's Twitter accounts were suspended in January, some were worried that Trump's ban may trigger an exodus of users and hurt Twitter's results.

Upbeat forecasts

Trump's ban came at the beginning of January 2021 therefore impact from this decision on the active user numbers will be known after Q1 earnings release (April 29, 2021). However, Twitter began labelling Trump's tweets as misleading last year and it did not have a major impact on its user base so far. Moreover, the company said that its user growth stood at around 20% in January 2021. It should be noted that Twitter experienced a slower user growth in Q4 2020 than other social media platforms but it was still a growth. Mid-term forecasts released by Twitter at the end of February painted a bright outlook. Company plans to increase the number of daily active users from 192 million in Q4 2020 to 315 million by the end of 2023. Revenue is expected to double to $7.5 billion by 2023.

Stock jumped on M&A reports

Shares of Twitter gained on Wednesday following a report from Bloomberg. News agency reported that Twitter has been in talks over acquisition of popular audio chat app, Clubhouse. According to sources Bloomberg spoke to, Twitter pursued a deal that would value Clubhouse at $4 billion. However, negotiations have ended and no acquisition took place. The report shows that Twitter remains committed to expanding its business. Clubhouse is seen as a successful innovation and Twitter, Facebook and Microsoft started to develop their own audio chat apps. Acquiring Clubhouse would give Twitter a kickstart as the US company would acquire a recognized brand with 10 million active weekly users.

Technical Situation

Twitter (TWTR.US)  has reached an intraday all-time high at around $80.50 at the end of February, following release of upbeat forecasts. However, share price launched a downward move later on and has erased half of gains made since the beginning of November 2020. 50% retracement at $59.50 acted as a support and Twitter started to recover. A point to note is that the stock has been the second best performing S&P 500 member over the past week and is expected to open higher today as well. Key near-term resistance to watch is the zone marked with 23.6% retracement at $71.30. Breaking above this hurdle would mean painting a higher high and breaking the downtrend structure.

Source: xStation5