Editor's Note: Twitter rose more than 32 percent strongly in two days, and Musk was named a director of Twitter. However, from a technical point of view, Twitter's upside space may be limited>>
Author: Fyuan
Recently, the stock price of social media giant Twitter is like a rocket, rising more than 32% in two days. The strong and continuous rise in Twitter's stock price is related to Tesla CEO Musk.
One or two days up more than 30%! Musk spent $2.6 billion and was appointed a director of Twitter
On Monday, local time, Musk disclosed that he held a passive stake of 9.2% of Twitter, becoming Twitter's largest individual shareholder and external shareholder. As soon as the news broke, Twitter's stock price soared by nearly 28%. On Tuesday, Musk revised regulatory documents to classify himself as an active investor, claiming to have spent $2.64 billion on Twitter stocks on an almost daily basis since the end of January. He currently holds 73.115 million shares of Twitter stock, or 9.1% of the company's shares. As of Tuesday's close, the stocks were worth $3.73 billion.
In addition, on Tuesday, Twitter also said in the latest 8-K filing with the U.S. Securities and Exchange Commission (SEC) that the company will appoint Elon Musk as a member of the company's board of directors, and the company's stock price rose more than 2% on the same day.
Musk will serve as a Second Class of Directors for a term that expires at Twitter's 2024 annual shareholders' meeting, the documents said. For the entire 90 days after a director's term or end, Musk may not hold more than 14.9% of Twitter's issued common stock.
Announcing musk's appointment as a director, Twitter CEO Parag Agrawal tweeted: "Elon, as a fanatical believer and strong critic of Twitter's services, believes that his joining the board will make Twitter stronger in the long run." ”
Musk then responded: "I look forward to working with Agrawal and Twitter's board of directors to make significant improvements to Twitter in the coming months!" ”
Musk is well adjusted to his new role, and the latest tweet has become a boss who is eager to ask his own users for improvement suggestions: Do you want to add a re-edit button (for Twitter)?
Twitter currently prohibits users from re-editing tweets that have already been posted, a potential change that, if true, would represent a major shift in Twitter's products. Twitter CEO also retweeted Musk's post yesterday, urging people to "vote with caution" because the result will be "important."
From a technical point of view, is Twitter worth buying?
In fact, while Twitter stock is up 32 percent in the last two days at $50.98, it's still down 38 percent from its all-time high in February 2021. From a technical point of view, its recent record rally has not yet completely reversed its long-term decline.
Twitter stocks are still below the 200-day moving average, and many Wall Street technologists see the 200-day moving average as the dividing line between a long-term upward and downward trend, and Data From FactSet shows the stock rose to around $52.03 on Tuesday.
In addition, the two-day rally allowed Twitter to record its biggest overbought reading since peaking 14 months ago.
The stock's Relative Strength Index (RSI) rose to 81.16 on Tuesday, according to FactSet. The RSI is a momentum indicator that tracks the strength of recent gains and downtrends. Many chart watchers believe that a move above 70 indicates overbought.
The last time the RSI broke the 80 level was on February 16, 2021, more than a week before the stock closed at a record high of $77.63 on March 1. This could be a warning to investors that, at least in the short term, further upside for the stock could be limited.
Why did Wall Street "pour cold water"?
While MKM Partners analyst Rohit Kulkarni is "excited and curious" about the positive role Musk could play at Twitter, he believes the stock's short-term risk and reward are "fairly balanced at current levels." On Tuesday, he downgraded the stock from "buy" to "neutral, keeping its price target at $49."
Kulkarni's main concern is that Russia's blockade of Twitter could hit the company. In addition, Twitter banned ads in Russia and Ukraine, which could affect the company's revenue growth.
Jefferies analyst Brent Thill gave the stock a "hold" rating with a price target of $48. In a research note, Thill said that while he didn't go short on Musk, he wanted to know the rationale behind Musk's investment. In our opinion, one of Musk's main motivations may be to influence Twitter's review policy, which he often criticizes as too strict.
For Thill, a major focus for the future is whether Twitter can move toward its goal of generating more than $7.5 billion in revenue and more than 315 million daily active users by fiscal year 2023. To achieve this goal, Twitter needs to grow its users at a two-year compound annual growth rate of 20%, which is much higher than the 13% growth rate in 2021.
"We expect the stock to remain range-bound until investors feel more confident in the ability of the new management to execute on the company's long-term objectives," Thill said.
Justin Post, an analyst at Bank of America, also said Musk's involvement could lead to a change in content policy, which is both an opportunity and a risk, as a major change to Twitter could prompt regulators to tighten scrutiny and will have an impact on advertisers. Still, he threw up the stock's "buy" rating with a price target of $54.
Post believes the platform has potential value, and its market capitalization does not fully reflect Twitter's reach, reach, and advertising opportunities. He added in a research note on Tuesday that Musk is good for investors to see the value of Twitter.
Currently, among the analysts on Wall Street who track Twitter, 8 are recommended to buy and 18 are recommended to hold, and the stock has a consensus rating of "hold" with an average target price of $45.27, meaning that it has 11.2% downside from its current level.
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