Twitter Talk

03/02/2015 7:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

This one-of-a-kind company—responsible for Tweets—offers a one-of-a-kind service that’s producing rapid (nearly triple-digit) revenue growth and skyrocketing earnings as the firm monetizes its base of 288 million users, explains Mike Cintolo, editor of Cabot Top Ten Trader.

Throw in tremendous trading volume, which allows institutional investors to buy and sell freely, and that’s why Twitter (TWTR) has surged recently, stocks with all of these sterling characteristics don’t grow on trees.

The company’s fourth-quarter report was very strong: timeline views grew a solid 23% from the prior year (to 182 billion), and thanks to myriad new and innovative advertising products and initiatives, ad sales per timeline view surged 60%.

The only remaining worry here is whether Twitter’s user base has topped out (it actually fell a few million from the prior quarter), which would obviously limit future growth.

But management said the December drop in users was mainly from an update in Apple’s software (i.e., a one-time event) and that user growth should resume in the quarters to come.

Yes, the valuation is high, but the top brass has already guided to a huge 2015 (revenues up 65% and even that is likely conservative).

And despite the recent growth, Twitter’s users are being monetized significantly less than users on Facebook (FB) and other social media, so there’s plenty of room for growth. It’s a big story and a potential liquid leader.

The only hitch with TWTR is the chart. While there’s been a lot of strength recently thanks to the well-received quarterly report (the stock surged 16% on five times average volume), there’s also plenty of overhead resistance from last October (in the $50 to 55 area) and last January (way up near $70).

Our advice: Start small with a half-sized position around here or on dips, use a loose stop near $42, and look to buy more should TWTR march higher from here.

Subscribe to Cabot Top Ten Trader here…

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