Twitter has a problem it may not want to chirp about.
According to comScore, data for June show that Twitter’s unique visitors were down by 6 percent month over month. Meanwhile, its engagement measure—which gauges frequency and length of visits—was down 1 percent month over month. Other social networks also saw declines in unique visitors month over month (Facebook down 4 percent and its Instagram subsidiary down 5 percent). However, Facebook and Instagram both saw higher engagement of 11 percent and 6 percent, respectively, on a month-over-month basis.
“It’s the only social company that we follow where both user growth and engagement were down,” said David Seaburg, head of sales trading at Cowen and Co. “It’s a scary proposition. You want to see user growth growing dramatically for a company that is trading at this much of a premium versus its peers.”
That makes him none too bullish.
“This stock is extremely expensive here in my opinion,” he said. “And another important point is that hedge funds really think this stock is going much lower. It’s one of the most hated stocks by hedge funds in the space. So, look I think you can see a lot lower levels from here.”
Richard Ross, global technical strategist at Auerbach Grayson, agrees with Seaburg from a technical perspective.
“Twitter is in trouble,” said Ross, a “Talking Numbers” contributor. “You don’t need to be trained as a technician to see the problems here with this chart. … Against a very strong backdrop for technology, Twitter shares—and social media, as a sector—[are] down sharply.”
The stock has bounced back from its 60 percent decline off its highs, leaving it stuck between its 50-day moving average at $35.79 and its 100-day moving average at $41.87 per share.
“If we were able to surmount that 100-day [moving average], you can make the case for a run back up to that $50 level which, for a lack of a better word, we’ll call the ‘Mendoza Line,’” Ross said, referring to a popular reference point used in baseball statistics. “But I don’t like it here. I don’t like its chances. I would be a seller into the strength of Twitter and social media as a group.”
A break below the 50-day moving average sets the stock up for a retest of its 2014 low around $30 per share, said Ross. “And from there you could re-see or retest that deal price of $26,” he added.
For the full discussion on Twitter, with Ross on the technicals and Seaburg on the fundamentals, watch the above video.