TWTR Options: Twitter’s Relevance is New Path to Profitability

Today marks the start of another beautiful week for trading stock options for profit. We are starting this week with an exploration of possibilities in the options of Twitter Inc. (NYSE:TWTR). Twitter with its market capitalization of $25.5B is a global platform for public self-expression and conversation in real time. Twitter is a real-time platform; where any user can create a Tweet and any user can follow other users. Viewers can see photos, videos and conversations directly in Tweets to get the whole story at a glance, and all in one place.

Catch Up on TWTR Options

I wrote about trading Twitter Options in May, in a post titled “Don’t Give up on Twitter: Profits On The Horizon.” In that post, I recommended the TWTR Sep 2014 41.000 call (TWTR140920C00041000) options despite the fact that shares of Twitter were trading at around $32 per share. As at 3:30PM EDT today, shares of Twitter were trading up some 0.32% to around $43.18 per share. The current $43 trading price places our earlier Sept 2014 41 call options in-the-money to reward our bullish bet.

Reasons to Stay Bullish on Twitter Going Forward

  • Impressive Second Quarter Results

On July 29, Twitter reported second quarter earnings that show that the company is heading out losses into profitability. Twitter reported a loss of $0.24 per share, which is lesser than a loss of $0.32 that was reported in the same quarter last year. In addition, the company reported earnings of $0.21 per share after accounting for items such as stock-based compensation and income tax effects. The highlights of the Q2 2014 earnings are presented below:

  • Q2 revenue of $312 million, up 124% year-over-year
  • Q2 net loss of $145 million and non-GAAP net income of $15 million
  • Q2 GAAP EPS of ($0.24) and non-GAAP EPS of $0.02
  • Q2 adjusted EBITDA of $54 million, representing an adjusted EBITDA margin of 17%

Quoting Dick Costolo, CEO of Twitter “”Our strong financial and operating results for the second quarter show the continued momentum of our business…We remain focused on driving increased user growth and engagement, and by developing new product experiences, like the one we built around the World Cup, we believe we can extend Twitter’s appeal to an even broader audience.”

  • Increasing Relevance for Global Events

It is no longer news that Twitter broke into the limelight after it served as the first transmitting link about the “Hudson place crash” in 2009.  Some four years later, Twitter has established its dominance as a real time news-sharing platform where people can voice their opinion on world events. This became more evident in recent times during the just concluded FIFA World Cup in Brazil. The Winter Olympics, Super Bowl, Grammys and Oscars are other events where Twitter’s relevance has shined. I strongly believe that the company will be able to increase its level of user engagement for great monetization of its platform for ad revenues.

How to Trade TWTR Options

I am bullish on Twitter despite the fact that many investors and traders are afraid that most social media stocks might be overvalued and that a crash might be imminent. Twitter is not one of the social media stocks that caught the overvaluation bug and I believe that the company will increase its share price back to its 52-week high. I have a $50 price target on the stock in the next six months and I recommend the TWTR Jan 2015 45.000 call (TWTR150117C00045000) at an asking price of $4.45.

— Daily Option Alerts

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