An Earnings Play in Twitter

While plenty of names are reporting tonight, my focus is clearly going to be on Twitter (TWTR). I would love to say expectations couldn't be any lower, but that is the sentiment I am seeing just about everywhere. Not the sentiment that expectations are lower, but the sentiment that folks "perceive" everyone has low expectations. After Facebook (FB) produced a strong number, I think TWTR actually does have to produce a strong result. An in-line result for a company with low expectations will often pop a stock. I don't see that as the case with Twitter. It needs to exceed expectations and provide an optimistic, forward-looking picture.

With only one public report under its belt, there isn't a whole lot of history to go on. The stock was hit for 24% and never traded better than down by 18% on the day. It is hard to expect a similar downside result this time, especially when the stock has given up another 20% on the downside. I would have preferred to be more aggressive on the upside if the stock hadn't jumped 5% already today. That type of move into earnings tells me expectations are not really that low. Furthermore, call-buying has been aggressively outpacing put buying today -- another case of investors expecting upside....239 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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