Thursday, December 2, 2021
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Netflix Stock – Twitter Is Now a Long-Term Secular Short

It’s so good. I was quoting Frank the Tank from Old School this morning as I was selling my Twitter (TWTR) weekly puts. I bought those puts at WAY-out-of-the-money strike prices Thursday, and then last night Twitter reported earnings.

EPIC fail.

User growth missed Wall Street estimates and the outlook was underwhelming. I got that from newswire reports. I haven’t read Twitter’s release yet, and didn’t listen to the conference call. I will eventually read the release for one reason: Twitter has moved boxes from “great options play” to long-term secular short.

Thus far this earnings season we have seen Tesla ((TSLA)) and Netflix (NFLX) move into that category. I have been researching stock fundamentals for the past 30 years, and I don’t have enough space to fully go through it here. Suffice it to say, however, tech stocks are valued on sequential growth and Tesla and Netflix showed a severe lack of it. Again, forget year-on-year comparisons, as these are flattered by COVID comparisons. In the Valley, only sequential comps matter and Tesla and Netflix were both throwing up red flags.

And Twitter? Well, sequential growth in global users showed a “torrid” 3.6% in the quarter. Oooooh, I gotta have some of that. Actually, you don’t.

I believe Twitter is a platform for awful behavior. It’s one thing to disagree, but stuff on there goes way beyond that. Not to mention the misinformation. And it’s one more thing to deactivate your Twitter account.

That’s the thing. I believe that most Twitter users are inactive, but they can still be counted in Twitter’s incredibly opaque mDAU calculator (which is not verified buy any independent source, anywhere). So, I used this article from the Today show, of all places, to delete my Twitter account a couple months ago, and, believe me, I couldn’t feel any better about it. Especially with the stock’s plunge Friday, which is making my trading account feel as fulsome as my conscience does.

But please understand the difference between trading tactics and strategy. The broader strategy is that stocks, especially tech stocks, are more highly valued than they have been in the past 10 years, and in many cases, since the Tech Bubble year of 2000. However, you have to be smart when you trade options around earnings.

My tactics rarely include standing on railroad tracks in front of an incoming train and yelling “bring it!,” which is why I didn’t trade Apple (AAPL) or Amazon (AMZN) ahead of earnings. There’s just too much momentum there. But the weaker members of the herd are showing signs that they will be unable to live up to the growth expectations baked into their ridiculous earnings multiples, and that is, tactically, when you should pounce.

I have no idea why TWTR hit $80 earlier this year — fortunately, I had the good faith to hold on to my long-term short then. It almost killed me, but this stock is not worth $30, let alone the high $50s where it is crashing to Friday. Trade accordingly.

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Netflix Stock – Twitter Is Now a Long-Term Secular Short

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