Twitter has been a very interesting stock to watch this week. After months of declines, we've started to see gains. The gains are the result of a key acquisition made by the company. However, I believe that we are seeing a big overreaction and that massive declines are on the way for the stock. Today, we'll talk about the acquisition Twitter is in the process of completing, why the stock is likely to fall from here, and how binary options traders can take advantage of the trends. So, let's get right to it…
Twitter Has Acquired TellApart
The big push that is causing Twitter's stock to rise is the fact that they have moved forward with the acquisition of TellApart. However, they got a much better deal than what was originally agreed upon. That's because the original acquisition was agreed upon when the value of Twitter's shares was at $42.27 and that the acquisition is mostly in shares. In fact, Twitter is only making a cash payment of $22.6 million. The other $479.1 million will be paid in a pre-agreed upon amount of shares.
Twitter is hoping that the acquisition of TellApart will help the company to build revenue by increasing engagement on re-targeting ads. TellApart is an ad agency that has the re-targeting process boiled down to a science! Now, the big question is, will this help Twitter?
Will The TellApart Acquisition Actually Help Twitter
If you've followed Twitter, you know that the company has struggled for quite some time now. For more than a year, the big concern among investors has been Twitter's dismal user growth. In fact, in early 2014, the previous CEO of the company, Dick Costolo resigned as a result of pressure from investors. In his place, co-founder Jack Dorsey stepped up and took the position. However, since then, Twitter hasn't really done anything to solve their problem. In fact, the acquisition of TellApart is a testament to the fact that Twitter simply doesn't have a plan to solve the problem at hand. Instead of focusing on improving the user experience, the company is focusing on making more money off of the users it has by increasing ads.
Here's the kicker my friends, ads are a very delicately balanced part of a website. If you put too many ads on a website, you're going to start scaring users away. Believe it or not Twitter has already started doing that. In fact, we're starting to see retreating numbers when it comes to daily active users on the social network!
What We Can Expect To See Moving Forward
Considering that TellApart will do nothing to solve the problem that Twitter is facing, I believe that the gains we're seeing on the stock are an overreaction. Therefore, I'm expecting to see a correction, leading to further downward movement relatively soon. In fact, if we don't see the stock moving down by tomorrow or Friday, I'm going to be very surprised. From there, the downtrend will be the trend to follow. The reality is that until Twitter starts focusing on user experience, we can't expect to see gains in the value of the stock.
How Binary Options Traders Can Take Advantage Of The Trends
As binary options traders, our job is to predict where the values of financial assets are headed. So, Twitter is creating a compelling opportunity. To take advantage of the trends, traders should watch the stock for the first signs of a correction from recent highs. From there, it's time to start trading puts in order to follow the trends down to the profits!
What Do You Think?
Where do you think Twitter is headed moving forward? Let us know your opinion in the comments below!
[Image Courtesy of Pixabay]