Is a Showdown Brewing Between Facebook Inc and Twitter Inc?

Rivals Facebook Inc (FB) and Twitter Inc (TWTR) look like they're headed in opposite directions

by Alex Eppstein

Published on Aug 12, 2015 at 10:27 AM
Updated on Jun 24, 2020 at 10:16 AM

Facebook Inc (NASDAQ:FB) appears to be encroaching on enemy territory, amid reports the company is developing a mobile news app that resembles rival Twitter Inc (NYSE:TWTR). According to sources, the product is currently being tested by a few companies. While this could eventually be a boon for FB, it presents yet another potential challenge for TWTR to overcome.

While the social media firms share some similarities, their technicals tell completely different stories. FB is currently sitting on a more than 17% year-to-date advance, last seen at $91.63. Late last month, in fact, the stock struck a record high of $99.24. By contrast, TWTR's down 20% in 2015 at $28.71, and is currently buckling under pressure from its 10-day moving average -- as well as broad-market headwinds. What's more, the shares hit an all-time low of $26.87 last Friday.

In addition, from a contrarian perspective, the pair seem positioned to widen their technical divergence. In FB's case, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been buying to open puts over calls at a faster-than-usual rate in recent weeks. Specifically, the stock's 10-day put/call volume ratio of 0.51 ranks in the top quartile of its annual range. A capitulation among these skeptics could push Facebook Inc (NASDAQ:FB) further up the charts.

By contrast, the Street remains tilted in a bullish direction on Twitter Inc (NYSE:TWTR). Nearly half of covering analysts rate the stock a "strong buy," with not a single "sell" to be found. Likewise, the equity's consensus 12-month price target of $40.06 sits in territory not charted since late April. In other words, a round of downgrades and/or price-target cuts could exacerbate selling pressure.

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