I like TWTR. I even believe in TWTR. However ahead of Tuesday's earning I had to sell it all.
- CEO wouldn't likely quit ahead of a stellar quarter. He would quit ahead of a so-so or bad quarter.
- New features will not be helping too much yet e.g. Persicope aint gonna do it.
- It's just too speculative and only a gamble.
I typically look for stocks that have momentum and a reason to win short or long-term. I actually like to buy names after they report a good quarter rather than before they report a good quarter. Unless I can find reason it should be a good quarter (like a new iphone being introduced, I would buy ahead of earnings but sell after 2 qtrs once it faded). Now let me focus on my three main points.
1. CEO wouldn't likely quit ahead of a stellar quarter. He would quit ahead of a so-so or bad quarter.
Personally I think Dick did a good job in running TWTR but a not very good job at growing the company. TWTR built itself once he took over and he just needed to steer it from destruction. He was a very good CEO. But it is obvious that they paled in comparison to how FB grew their company. FB bought Instagram and TWTR missed out completely. I think Dick resigning was the right move and there is plenty of talent who will know how to better grow TWTR and not just steer TWTR away from the walls.
Everyone knew Dick was facing open criticism about TWTR growth and clearly he couldn't take the heat. It is not an easy job. But in this moment it is easy to consider that Dick would not quit his job if future eps were going to be sufficient. Im sure Dick would love to stay CEO and prove his critics wrong...I highly doubt he would quit if the next 2 qtrs were proving to be successful.
2. New features will not be helping too much yet e.g. Persicope aint gonna do it.
I also really like Perscope. I think TWTR can do a lot with Periscope. News channels and YouTube should be afraid of Meerkat and Periscope. They are totally different services, YouTube and Periscope, however eyeballs will be pulled from YT if Periscope does it right. Live action news like fires in las vegas or trump announcing presidency is great stuff that pulls users in immediately and away from YouTube. Or a heavyweight fight will do it too. And I see more and more content being created on Periscope as the weeks pass by. not just more content but improved content.
But the growth will not matter today. Periscope is like Apple's watch, a great idea but it isn't mature enough to make much money and it isn't generating enough content to make TWTR a growth story. But the potential is there for what TWTR does best, capture live stories. No one does it better than TWTR. Periscope will be able to capture live news faster than any news network. And they might even get some interesting nightcrawler type figures (amatuer footage at its best).
3. It's just too speculative so why gamble.
I have learned my lesson and I fear quarterly results. I have been investing since 2003 and worked on sell-side for many years in NYC. The problem with TWTR is there are no real signs of improvement. It is possilbe that TWTR finally announces a shred of improvement and signs that it is turning around. I believe it is possible to make money after they report and you don't need to gamble on those 30 minutes of results and conference calls.
Additionally, the sense of fear in the market is palpable. High-beta names will likely to continue to underperform. Did you see today? Beat up names were up and high-flying names were down. And TWTR is still expensive. I'm on the sidelines waiting for something better to come along.
I am not long TWTR or FB. Enjoy!
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.