Michael Khouw: No Major Catalyst To Propel Twitter Inc (TWTR) Stock Before Next Earnings Report

Twitter Inc (NYSE:TWTR)’s earnings report has become the major talking point in the last few days. Even though Twitter Inc (NYSE:TWTR) managed to meet Street’s expectations to a certain level, the social media company has given a much lower full year guidance for 2015, which displeased many investors. Twitter Inc (NYSE:TWTR) stock plunged soon after and dropped more than 20% of its value. Meanwhile, Jack Mohr of Action Alert Plus and Michael Khouw of Action Alert Options discussed on ‘The Street’ about Twitter Inc (NYSE:TWTR) stock and what investors could do with it at the moment.


Khouw said that it has been a tough quarter for Social media stocks in general except for Facebook Inc (NASDAQ:FB) and to some extent LinkedIn Corp (NYSE:LNKD). He pointed out that there is an unknown material sitting on the horizon for Twitter, which is the Periscope. He feels that Periscope is going to increase user engagement in Twitter platform significantly, which has been their major problem. He said that Periscope effect on Twitter’s user engagement was not a part of the last earnings report. He mentioned that we might be able to get some transparency on that factor in the next quarter.

Mohr pointed out that the investors had lost trust in the Twitter management.

“I think the big thing is that the trust in management has eroded and they lost that trust because in the fourth quarter they made some pretty strong promises and laid out some pretty aggressive full year expectations and I think they were getting excited about Periscope, about some new products, about the partnerships with Google and so they set the expectations very high and Twitter simply did not deliver, but worse they basically said that we don’t know what’s going to happen rest of the year. They lowered their guidance, but they didn’t even provide guidance on active users. So I think that its going to take actual results to get investors back in this stock and I don’t see results coming in potentially next 2 quarters,” Mohr said.

Khouw said that when stocks start to jump around like Twitter’s stock, options premium remains elevated. He said that there is no major catalyst to propel Twitter stock higher before the next earnings report, except for the Google takeover talks. He said that investors who own the stock should consider selling some June 40’s or the June weekly 40’s and collect 2.5% to 3% premium.

Mohr accepted that Twitter stock might get interesting in the long term. He feels that there is catalyst like innovative products, Periscope and Google partnership to propel the stock higher in long term. He thinks that the Google partnership is going to be very important for Twitter, since Google can teach a lot of tricks to monetize the market, which is the most basic need for Twitter at the moment.

Disclosure: None

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