The share price of online social networking service Twitter (NYSE: TWTR) is once again gathering steam. After hitting the 12-month low of $13.91 in February 2016, the share price of Twitter has increased by about 20% to $17.40. Two days before, reputed analyst Robert Peck of SunTrust Robinson Humphrey stated that Twitter is likely seeing a rise in the MAU (Monthly Average User) numbers, a much sought after data for social media platforms. The analyst also reiterated his buy rating for the company, while forecasting a price of $20 in the short-term. Let us assess the changes that have taken place on Twitter in the recent past and its effects on the business.
According to Peck, the core MAU, devoid of “SMS Fast Followers”, is expected to be about 309 million. The analyst also believes that the forecast would be right because of the fact that seasonally the first quarter is generally stronger for MAUs.
During the fiscal 2015 fourth-quarter, the daily active users (DAU) remained almost the same compared to the similar period of fiscal 2014. In fact, sequentially, the retention rate increased in the fourth quarter. Even though Twitter’s growth remains sluggish, the number of advertisers using the platform has almost doubled. In the fourth quarter, the company reported a 90% (y-o-y basis) increase in the advertisers to 130,000. This resulted in a 48% increase in revenues in the fourth quarter.
Furthermore, the company has taken steps to increase the number of advertisements placed on the web portal. The company expects the average revenue per user (ARPU) in the US to increase from the current level of $6.31. The company’s main competitor Facebook’s (NASDAQ: FB) ARPU is $13.54. To increase the ARPU, Twitter has brought in premium advertisement products such as “Promoted Moments” and “First View”.
To encourage advertisers to make optimum use of the platform, Twitter has started offering a self-serve facility in more than 200 countries. To further increase the number of active users, Twitter has recently introduced a new facility named “While you were away”, which uses an algorithm to modify the position of tweets based on the interest of the user.
Due to the above-discussed changes, eMarketer, a market research company, has forecasted that Twitter will be able to achieve an ARPU of $32.22 in the US and $10.12 in the rest of the world in 2016. Thus, a trader can be cautiously optimistic about Twitter’s future performance.
Support for the stock, as per the chart, exists at 16.80. On the upside, the major hurdle is at 26. The RSI reading is a little above the half-way mark of 50. More importantly, for the fourth consecutive day, the stock has firmly closed above the 17.01, which is the 50-day moving average.
Thus, a binary options trader can capitalize on the probable uptrend by purchasing a one-touch call option contract. Any strike price near $20 would favor the trader. In the same manner, to offer enough time for the price action to achieve the target level, the contract should preferably expire during the third week of May.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
