Notice Twitter's 3.5% drop today?
Hedgeye Internet & Media analyst Hesham Shaaban has been among the few bears on Twitter (TWTR). He recommended investors short the social-media company back in April 2014 when the stock was trading over $40 per share. Here's an interesting excerpt from a note sent to institutional subscribers back then:
"... TWTR is in a precarious setup. Every time TWTR beats estimates, consensus estimates move higher. However, street expectations differ from consensus: TWTR is expected to continue to beat those increasing estimates, and guide higher.
We continue to expect a dramatic slowdown in revenue growth into 2H14, and particularly 2015 (see notes below for supporting detail). Our bearish fundamental view vs. rising consensus & street expectations suggest the setup will only get worse from here.
In short, the hurdle keeps moving higher while its growth prospects get progressively worse." - Hesham Shaaban, "TWTR: Re-Shorting." 4/30/2014
Nice call, huh?
Shaaban pretty much nailed it. As you can see from the chart above, TWTR shares are down more than 43% since he recommended shorting the company in April 2014. Shaaban's short thesis has been the tail wagging the dog (a.k.a. TWTR's stock price) ever lower. The company's revenue forecast has been consistently ratcheted down over time.
Curious about our original short thesis on Twitter?
Below are two videos of Shaaban laying out his thesis. Give them a watch. Even with the drastic draw-down in the shares, we think his original call-outs have room to run. (If you'd like to read Shaaban's more granular research notes on Twitter or anyof the other companies he covers please email firstname.lastname@example.org.)