Twitter shares have weakened more than 6% since the beginning of September. Should I invest?

Twitter, Inc. (NYSE: TWTR) has proven its stability during the first half of the 2021 fiscal year and reported better than expected second-quarter earnings results in July. Despite this, Twitter shares have weakened more than 6% since the beginning of September 2021, and the current share price stands around $60.

Fundamental analysis: Twitter finished the second quarter with 206 million monetizable daily active users

Twitter continues to improve its position in the market, and the second-quarter earnings results show that it is moving in the right direction. Total revenue has increased by 74.1% Y/Y in the second fiscal quarter to $1.19 billion, while the GAAP EPS was $0.08 (beats by $0.22).

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Twitter finished the second quarter with 206 million monetizable daily active users (mDAU), representing an increase of 3.5% from the first quarter of 2021. Twitter expects revenue to be between $1.22 billion and $1.3 billion in the third quarter, while GAAP operating loss should be around $50 million.

Last week, Twitter announced that it would start to test a new feature that allows you to remove a follower without blocking or notifying them. Twitter is also testing the ability for content creators to send and receive tips using Bitcoin, and it is important to mention that Twitter CEO Jack Dorsey’s Square (NYSE: SQ) has its own crypto team.

Twitter has recently launched the Super Follows feature, which adds paid subscription content to the platform and has significant potential for market expansion. Twitter is in a good position to grow its business, and the consistent strong execution should drive healthy growth in the upcoming quarters.

Technically looking, Twitter shares could advance above the current price levels this month if the US stock market does not enter into a significant correction; still, the risk/reward ratio is not good for long-term investors. Twitter trades at more than fifty times TTM EBITDA, the book value per share is around $9.6, and fundamentally looking, Twitter’s valuation is certainly not cheap.

Goldman Sachs reported this Monday that it sees Twitter as a differentiated media/publishing platform and assigned a “sell” rating on the company’s shares.

“The “town square” aspect of Twitter is what offers a unique proposition for users, so the main debate is whether Twitter can morph its core use case to appeal to a wider, more scaled audience base; or execute against more niche monetization opportunities (e.g., creator monetization, etc.) that align with the platform’s current distribution,” Goldman Sachs reported.

Technical analysis: Twitter shares remain under pressure

Twitter shares have weakened more than 6% since the beginning of September 2021, and if the price falls below $55 support, it would be a strong “sell” signal. On the other side, if the price jumps above $65, it would signal buying shares, and the next target could be around $70.

Summary

Twitter is in a good position to grow its business, but fundamentally looking, Twitter’s valuation is certainly not cheap, and there are better long-term investment opportunities at the moment. Twitter shares have weakened more than 6% since the beginning of September 2021, and if the price falls below $55 support, it would be a strong “sell” signal.

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