Twitter Stock Just Hit a 2-Year High, and One Analyst Thinks the Rally's Just Begun

February call buyers have jumped on Twitter stock

by Josh Selway

Published on Jan 12, 2018 at 10:14 AM

Twitter Inc (NYSE:TWTR) has been a long-time punching bag for Wall Street, but the social media stock has been a technical outperformer since bottoming at $14.12 last April. In fact, it just surged 42.3% in the fourth quarter. This technical strength is continuing today, with the shares last seen trading at a two-year high of $25.70, as a bullish analyst note has lifted TWTR stock 5.8% this morning.

Specifically, BTIG thinks this is just the beginning of a multi-year turnaround for the company, and recent changes will result in users spending more time on the platform -- essentially the opposite of what's happening with rival Facebook (FB). BTIG lifted its price target to $30, predicting upside of nearly 17% from current levels. 

Over the past year we've periodically noted the lack of analyst optimism toward Twitter stock. As it stands now, just three of the 29 covering brokerage firms say to buy the equity, while eight give it a "sell" or "strong sell" rating. In a similar vein, the shares have flown past their average 12-month price target of $20.26. This would suggest more bull notes could come through and keep the wind at TWTR's back.

Some options traders have been betting on such a breakout. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security has accumulated a 10-day call/put volume ratio of 6.55, which tops 86% of readings from the past year. This shows an unusual interest in long calls over puts.

Much of the action during the past two weeks occurred at the February 26 call, which saw the largest increase in open interest during that time. Data from the major exchanges shows buy-to-open activity here, so these bulls were betting on Twitter toppling $26 before expiration on Friday, Feb. 16 -- a timeline that encompasses the company's Feb. 8 earnings release.

Call volume is already extremely accelerated this morning, too, with close to 100,000 of the contracts traded so far. This is eight times the pace expected, and already exceeding the average daily volume of 79,000. For comparison, fewer than 8,400 puts have crossed so far.

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