Twitter closed today at $49.14, a huge jump of nearly 10% in one day. At one point today Twitter hit its all time high of $49.84. I’ve already made it clear that I’m not a big Twitter fan. Anytime I see a stock hit a 52-week high I start looking whether there’s short potential, and the reason I potential here is that I can’t tell you a clear reason that the stock jumped so much, so quickly today.
Some analysts think the jump is due to continued investor optimism after Twitter’s announcement of Tailored Audiences, which would allow advertisers to better target users using their stored data. While that may show promise long term, it doesn’t explain the pop today. Any big jump should have happened on Thursday when it was announced, not 2 trading days later. Finally, keep in mind that Twitter isn’t expected to make a profit until 2016. So even if these ads work, it will be a while until we see a solid financial performance from them. As of today the stock trades at about 25 times projected revenue for 2014, a pretty expensive multiple considering Facebook trades at 12 times sales.
As another potential explanation, Jim Cramer thinks shares may be propped up by a high number of shorts. Again, not a very reassuring reason for the share price to jump.
I’m going to be keeping a close eye on this stock tomorrow morning. If it hits the low 50s I’ll likely be adding a short position. And if I was holding this long (I’m not), I would probably have sold tomorrow and re-entered at a lower price.