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Too Tough to Buy Twitter at 60

Twitter Inc. (TWTR) reports Q4 2020 earnings after Tuesday’s closing bell in the United States, with analysts expecting a profit of $0.31 per-share on $1.19 billion in revenue. If met, earnings-per-share (EPS) will mark a 106% profit increase compared to the same quarter last year. The stock lost ground in October despite beating Q3 top and bottom line estimates after modest revenue growth failed to inspire buying interest.

No Backlash After Trump Ban

The social media sector sold off in January after banning Donald Trump for Terms of Service violations but an expected backlash never materialized. Ironically, punitive actions taken by Twitter and Facebook Inc. (FB) have lower the prospects for repeal of FCC section 230, which provides limited immunity for their platforms. The rule was a frequent Trump political target but the Biden administration is unlikely to bite the hand that feeds it.

KeyBanc Capital Markets analyst Justin Patterson upgraded Twitter to ‘Overweight’ in late January, noting, “Our view is that execution is improving, and the combination of a cyclical ad recovery and new products creates potential for revenue to outpace our above-consensus revenue estimates in 2021 and 2022. We see sustainable 20%+ annual revenue growth from the core business, with monetization of Revenue (estimated $36B TAM) and other new services creating significant option value.”

Wall Street and Technical Outlook

Wall Street consensus now stands at a skeptical ‘Hold’ rating based upon 12 ‘Buy’, 21 ‘Hold’, 1 ‘Underweight’, and 4 ‘Sell’ recommendations. Price targets currently range from a low of just $17 to a Street-high $67 while the stock has opened Tuesday’s U.S. session about $8 below the high target. Additional upside will be tough with this lofty placement but a strong quarterly report could generate higher targets.

The stock posted an all-time high at 74.73 a month after coming public in 2013 and sold off in a three-year downtrend. It broke out above tough resistance in the mid-40s in September 2020 and is now trading less than two points below the .786 Fibonacci selloff retracement level. This marks major resistance for uptrends cutting through old supply, raising odds for a reversal and intermediate correction that could offer a low risk buying opportunity in the 40s.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.