Friday, September 19, 2014

* Twitter (TWTR) - A Whirlwind of Contradictions & Two-tailed Risk (8 Charts)

Share on StockTwits

TWTR is trading $53.00, up 4.2% with IV30™ down 4.2%. The Symbol Summary is included below.

Provided by Livevol

I'm going to try fewer words and more visualizations.  Here the realities for TWTR in visualizations that can make arguments for anything from extremely bullish to extremely bearish to anything (and everything) in between.  You tell me what you think about the stock after seeing all of this.

As an aside: I love the product... a lot.  I have no position in the stock.

Before we get into one financial measure at a time, let's start with the pièce de résistance. One chart where TWTR looks exceptional relative to its peers:

X-Y Factor
One-Year Revenue Growth on the 'x-axis' and R&D / Operating Expense on the 'y-axis.' There's TWTR, and then there's everybody else. Full Size Image Here

Revenue (TTM)
Looks beautiful, growing now to just under $1B in the trailing twelve months.

Revenue (TTM) (Comp. to Peers)
Other than TRLA, the revenue growth over the last year puts TWTR at the top.

Total Assets
TWTR asset growth has been remarkable. 

Total Assets (Comp. to Peers)
When I write remarkable, I mean there's TWTR, and then there's everybody else.

Net Income (TTM)
So this is where it goes sideways... and by sideways I mean straight down.  TWTR has never turned a profit, and losses are expanding.

Net Income (Comp. to Peers)
So there's TWTR... and everybody else... in the bad way.

Cash from Operations, 1-Year Growth %
Since the data wasn't conflicting enough, this measure is crazy. There's TWTR, and then there's everybody else. I do note that this is partially "small number math."

And one last one...

Research & Development
Did you know TWTR was spending ~$0.44 out of every $1 in operating expense on R&D?... me either.

Since I'm an options guy, we gotta look at the skew.  The Skew Tab snap (below) illustrates the vols by strike.

Provided by Livevol

I note that the skew is parabolic, which in English means that the option market reflects two-tailed risk in the stock.  this is actually "abnormal" skew.

To read more about skew, what is and why it exists you can click the title below:
Understanding Option Skew -- What it is and Why it Exists.

Finally, the Options Tab is included below.

Provided by Livevol

Using the at-the-money (ATM) straddle we can see that the option market reflects a price range of [$50.00, $55.00] by the end of trading on October 17th.

  • If you believe the stock will be outside that range on expiry or any date before then, then you think the volatility is too low.
  • If you believe that range is too wide, and that the stock will definitively be in that range on expiration, then you think volatility is too high.
  • If you're not sure, and can make an argument for either case, then you think volatility is priced just about right.

This is trade analysis, not a recommendation.

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1 comment:

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