Quarterly Earnings Can Kill a Stock’s Rally

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Those readers of this blog know that I have owned Twitter stock for some time. The price of the stock was steadily holding in the high $40 to low $50 range for the past few weeks. Over the last month the $TWTR stock has not fallen below $50 at the closing bell of 4PM EST. That was of course until April 28th, 2015 when their first quarter earnings were presented.

Today Twitter’s recent momentum went out the window. It is being reported that Selerity, Inc. ironically enough tweeted about how Twitter wasn’t going to meet expectations for the first quarter. This resulted in a frenzy of sell off of the stock that actually resulted in the New York Stock Exchange hauling trading for a period of time.

Twitter’s quarter revenue missed on expectations by about $20 Million, but seems to have hit or come close to other expectations. For more info on Twitter stock info visit their investor website.

Here is our chart from Yahoo Finance of Twitter for April 28th, 2015:

twtr42815

As you can see from the chart once the news broke of Twitter missing earnings estimates the stock plummeted for most of the time thereafter, gaining some momentum right at the close of the trading day. Ultimately the stock went down $9.39 (18.18%) within a one hour period, a portion of which trading was halted for!

The scary part of this situation is that normally stocks that are reporting their quarterly earnings gain some momentum in the after hours period of trading. Twitter went down another $0.69 (1.63%) during the after hours trading period, likely because they didn’t like what CEO Dick Costolo had to say.

Individuals are starting to lose faith in Costolo, as while giants of the social media industry like Facebook continue to make solid purchases of products people actually use Twitter finds themselves purchasing products very few individuals are aware of. Twitter also lowered their expectations for the entire year.

This is why I am a long term investor, as individuals are seeking instant gratification, hoping for a great report of earnings day so they can cash in on their investment. I would rather pursue a strategy of growth. There seems to be a plan at Twitter, even if it is coming along slower than most would like. Whether or not CEO Dick Costolo is the right man to execute this plan remains to be seen though.

I’m still long on $TWTR as they say, but will be keeping my eye on it. To listen to the Twitter conference call visit the Twitter investor relations website.

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