Twitter Stock Downgraded As Earnings Approach

Macquarie still upped its price target though

Managing Editor
Jul 18, 2018 at 9:56 AM
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Less than a week after receiving an ambitious price target from Goldman SachsTwitter Inc (NYSE:TWTR) stock was hit with a bearish brokerage note today. Macquarie downgraded the social media entity to "neutral" from "outperform," with the analyst in coverage believing the stock's upside is already priced in, while noting concern product improvements may not help attract new users. The analyst did however raise the stock's price target to $42 from $36, praising its recent purge of suspicious accounts.

In response, Twitter stock is 0.9% lower to trade at $44.31 this morning. Since racing to a three-year high of $47.79 on June 15, the equity has consolidated between the $44-$45 neighborhood -- home to the stock's 30-day moving average, which is containing today's dip. Overall, TWTR has more than doubled in the past year, and sports an impressive 85% gain in 2018. 

Nevertheless, skepticism has been picking up in the options pits recently. The stock's 10-day put/call volume ratio of 0.42 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 78th annual percentile -- meaning puts have been bought to open relative to calls at a quicker-than-usual clip. 

Some of this activity could be at the hands of shareholders protecting paper profits against a post-earnings pullback, with Twitter is slated to report its quarterly results ahead of the open next Friday, July 27. Regardless, TWTR stock has consistently rewarded premium buyers over the past year. This is based on its elevated Schaeffer's Volatility Scorecard (SVS) reading of 93 (out of a possible 100), which indicates the equity has tended to make outsized moves compared to what the options market was expecting.


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