Twitter Inc (NYSE:TWTR) will release its earnings numbers for the three months through June on Tuesday July 29. The panic around the overvalued under-earner is already starting, with the stock losing more than 1% on today’s market. Even as the online ad market explodes and companies like Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) pick up value the market doesn’t seem to trust Twitter Inc (NASDAQ:TWTR).
Time to sell Twitter
The argument for selling Twitter Inc (NASDAQ:TWTR) stock before the company shows off its earnings numbers is summed up by Jeff Reeves over at Marketwatch. According to his piece, titled Why you should dump your Twitter shares now “the risks are too large to hang on to Twitter” into its earnings release. He’s got five good reasons to back him up.
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They are, in order: Lack of profit; overvaluation even on speculative profits; slow user growth; slower monetization and engagement; and Wall Street’s expectation that the company is going to show a profit sometime soon. It’s hard to argue with Reeve’s on any of his points, but it might be good to question who he’s arguing with.
Twitter Inc (NYSE:TWTR) is overvalued by any sane metric, and shares may collapse after earnings on Tuesday, but nobody is buying into the company coming out of a stock screener.
Twitter isn’t there for value
There’s very few web properties anybody could claim as value investments, and Twitter Inc (NASDAQ:TWTR) certainly isn’t one of them. No value investor in their right mind is betting on the micro-blogging site for anything more than fun, and anybody disputing that might want to re-read The Intelligent Investor.
There are a number of kinds of investor involved in Twitter Inc (NASDAQ:TWTR): some are playing volatility and jumping in and out, some are having a fun bet on a technology they reckon is going to stick around, and some are hoping that they can predict the actions of the first two groups. Twitter is a vehicle for momentum players, options buyers and speculators, it’s not going to refuse investments from them, and none of them are going to be swayed by arguments about the company’s profits or lack thereof.
There are surely a number of investors who bought Twitter Inc (NASDAQ:TWTR) early on and are holding onto it in case the company gets its accounts together this decade. Getting in and out every time a high volatility event like earnings crops up is a way of feeding brokers and, though it may be a byproduct, that’s no investor’s job or goal.
What to look for in earnings
Twitter Inc (NASDAQ:TWTR) is expected to show a loss of one cent per share for the quarter it reports as its second of the 2014 fiscal year. The company is going to show off its numbers after the market closes on Tuesday afternoon and, with the other tech giants out of the way, the release is going to attract a lot of attention. Volatility is likely the name of the game after the release.