Twitter Inc. (TWTR) reported strong 4th quarter results with revenues up 2%, monthly active users up 4%, ad revenues up 1% and positive 4th quarter cash flows of $135 million. Twitter’s stock price responded by hitting $31.51 on Friday, topping the $30 level for the first time since late 2015. Twitter’s stock price was up +21.57% for the week, to the dismay of $1.3 billion of short sellers.
Twitter short interest has been climbing in 2018, starting the year at $911 million and adding $400 million of short exposure to bring total short interest to $1.311 billion, the 8th largest short in the worldwide Internet and Software Services Sector. Last week’s rally cost short sellers $231.8 million in mark-to-market losses, bringing year-to-date losses to $299.3 million, or down 31.59%.
| Internet Software & Services
(in $ millions) |
Ticker | Short
Interest |
1 Month Change
Short Interest |
YTD MTM
P/L |
YTD MTM
P/L % |
| Alibaba Group ADR | BABA US | $22,458 | -$1,820 | -$460.4 | -1.94% |
| Alphabet Inc A & C | GOOG/
GOOGL |
$7,128 | -$116 | +$50.6 | +0.71% |
| Tencent Holdings | 700 HK | $5,481 | -$683 | +$21.2 | +0.35% |
| Facebook Inc | FB US | $4,240 | -$529 | +$36.3 | +0.86% |
| Altaba Inc | AABA US | $2,015 | +$270 | +$18.1 | +0.94% |
| Verisign Inc | VRSN US | $1,550 | -$93 | +$72.0 | +4.52% |
| GrubHub Inc | GRUB US | $1,532 | +$386 | -$244.1 | -19.53% |
| Twitter Inc | TWTR US | $1,311 | +$367 | -$299.3 | -31.59% |
| Yahoo! Japan Corp | 4689 JP | $1,269 | -$129 | -$12.2 | -0.90% |
| Ebay Inc | EBAY US | $1,252 | +$22 | -$133.4 | -10.02% |
| W.W. Internet Software & Svcs | $67,169 | -$4,370 |
In spite of its solid 4th quarter performance, shorts continue to increase their short exposure in Twitter. Shares shorted are up by 3.5 million shares in 2018 and short interest is up $400 million in 2018. Both shares shorted and notional short interest have been increasing significantly since late January, and unless the firm can continue to increase revenues and profits without depending on cutting R&D, sales and marketing expenses, shorts will continue to hold onto or build their short exposure waiting for TWTR’s stock price to fall back into the teens.
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Managing Director Predictive Analytics, S3 Partners, LLC
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