3 New Positive Triggers For Twitter Inc Stock (TWTR)

  • Twitter's move to live stream the US presidential debates could be a masterstroke.
  • The Fed's decision to hold rates will come as a welcome relief.
  • Short interest and options data suggest that the market sentiment may be turning favorable for Twitter stock.

Twitter's deal with Bloomberg to live stream the US presidential debates could be a masterstroke for Twitter, and potentially translate to higher engagement levels and more revenue for the platform. The Fed's decision to hold interest rates comes as much needed relief for Twitter, because it's the company's international revenue that's driving growth at the moment. Based on short interest and options data, it appears as if the market sentiment is turning favorably for Twitter.

After The NFL, Now It's The Presidential Debate

For a lot of folks, viewership numbers from Twitter's first NFL live streaming were disappointing. But put in perspective, the numbers were actually pretty good. Reportedly, over 2 million viewers watched Twitter's live stream of the NFL game, and this article on Yahoo Finance does a great job explaining why that's a good number. Viewed from any angle, you'd think garnering about 13% of the total audience on debut is a decent success. With the initial success of NFL live streaming behind it, Twitter is now set to live stream the presidential debates in partnership with Bloomberg TV, starting September 26. Here's why this could be a great move for Twitter.

The run up to elections has been a particularly good period for Twitter. In 2008, the four presidential debates put together reportedly generated 500,000 tweets, a number dwarfed massively by a tally of 10.3 million tweets during the first 90 minute presidential debate between Mitt Romney and current US President Obama.

Also Read: Don't Short Twitter Inc Stock For Now

With Hillary Clinton and Donald Trump set to take center stage on the 26th of this month, Twitter looks poised to see a massive increase in engagement levels. And Twitter's move to live stream the debate could provide the platform with just the ammunition it needs. Earlier this month, Ad Age reported that the upcoming US elections could contribute as much as $7.5 billion in ad spends this year. Now that Twitter is live streaming the debates, it could potentially become a beneficiary of these spends. Either way, Twitter will welcome the likely increase in engagement levels.

The Fed's Move To Hold Rates Will Help

On Wednesday, the US Federal Reserve announced its decision to leave interest rates unchanged. A hike almost certainly means a stronger Dollar, which hurts US-based companies like Twitter, which earn a significant chunk of their revenue outside the US.

Nearly 80% of Twitter users reside outside the United States, and together, they generated a little over 40% of Twitter's revenue in Q2 2016, up from 34% in the preceding quarter. Twitter's US revenue grew at 12% YoY, while the company's international revenue grew by a significantly faster 33%. With much of Twitter's growth being fueled by geographies other than the US, a Fed rate hike would have really hurt Twitter in the coming quarters.

While a rate hike will eventually come at some point of time, for Twitter, this would probably have been the worst time for it to happen. With Twitter reporting its worst ever growth in the previous quarter, the company can ill afford another slip up. At least for now, the Fed's decision to hold rates should provide some welcome relief.

What Short Interest And Options Data Tell Us

As we'd highlighted in our previous article, short interest in Twitter has declined further to its lowest in 6 months. Latest available data as of August end released on 12 September shows that Twitter's short interest currently stands at 51.17 million shares or 8.1% of Twitter's float. That's the lowest it has been since March when short interest stood at 49.5 million shares.

What's more, as a percentage of Twitter's float, short interest is at its lowest in nearly a year. The last time short interest was lower was in September last year, when short interest was at 7.36% of Twitter's float, compared to the current 8.1%.

Coming to options data, Schaeffer's reports that call options more than doubled puts two days ago. Quoting from the report:

"The newly front-month October 20 call is among the most active options so far, with possible buy-to-open activity spotted, indicating traders are betting on a breakout above the $20 level by the time the calls expire on Oct. 21."

While this doesn't necessarily mean that Twitter shares will move higher, this data can be used as an indicator of market sentiment towards the stock. And based on short interest and options data, the sentiment looks more positive than negative.

Summing It Up

Twitter's deal to live stream the US presidential debates could be a game changer for Twitter and potentially translate to higher engagement levels and more revenue for the platform. The Fed's decision to hold rates comes as much needed relief for Twitter, since it's the company's international revenue that's driving growth right now. Based on short interest and options data, it appears as if the market sentiment is turning favorably for Twitter.

Also Read: Stay Away From Twitter Inc Stock For Now

These near term triggers could potentially drive Twitter stock higher. However, until such time that these opportunities translate to a clear improvement in the company's finances, conservative investors would do well to avoid the stock, since volatility could remain at elevated levels as discussed in our previous posts on Twitter

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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