Why prospects for Twitter's share price look painful
12th July 2022 07:25
by Alistair Strang from Trends and Targets
Share on
Elon Musk's aborted takeover of Twitter has repercussions for the social platform. Independent analyst Alistair Strang sets out what he thinks could happen to the share price.
By just about every standard, the recent attempted takeover of Twitter Inc (NYSE:TWTR) by Elon Musk was doomed to end in tears. The platform, unable (or unwilling) to supply accurate figures relating to the true number of automated accounts (Bot Accounts), revealed it was cancelling around 1 million computer generated accounts per day.
Elon Musk pulled out of the original deal, "considering whether the company’s declining business prospects and financial outlook constitute a Company Material Adverse Effect".
Twitter now appears to have a share price in the process of enjoying a little meltdown. The company appears to be exercising a strategy of taking Mr Musk to court to force him to complete the purchase or pay them $1 billion for pulling out.
The flaw in their argument is pretty obvious. To succeed in court, Twitter will need to reveal how many of their 'subscribers' are actually fake accounts, thus giving Elon Musk the information he required from the outset.
The prospects for Twitter's share price look fairly painful, as weakness now below $32 looks capable of triggering further reversals to an initial $22. If broken, our secondary calculates down at $19.5 and hopefully a bounce.
As the chart shows, the share price needs something approaching a miracle to indicate it's about to return to sanity.
Past performance is not a guide to future performance.
Visually, there appears some hope that closure above $40 should prove capable of suggesting Mr Musk is starting to take Twitter seriously again but, realistically, our inclination is to treat Twitter's price carefully unless it somehow exceeds the immediate downtrend, presently around the $47 level.
Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.
Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.