Earnings Crash Is Just Twitter Being Twitter

If there are any Twitter Inc TWTR 0.53% traders out there who caught off guard by the huge earnings sell-off on Thursday, history indicates you probably shouldn’t be. In fact, with the exception of the year’s first quarter, Twitter has demonstrated the exact same trading pattern heading into earnings and shortly after earnings in four of the past six quarters.

Twitter shares have typically higher heading into its earnings report and then disappointing earnings numbers have sent it crashing back down again. Here’s a recap of how the twitter earnings trade has gone down in recent quarters:

  • Q2 2017: Twitter rallied 7.2 percent to a $19.61 close in the month prior to earnings. On Thursday, shares crashed 13.9 percent.
  • Q1 2017: Twitter actually beat expectations on subscriber growth. Shares jumped from $14.66 to $15.82 after the report.
  • Q4 2016: Twitter rallied from the low $16s to $18.72 in the month ahead of earnings only to crash back down to $16.41 after the report.
  • Q3 2016: Twitter rallied 2.9 percent in the week prior to earnings, but kept rallying by more than 9 percent in the two weeks that followed on buyout rumors in the market.
  • Q2 2016: In the moth heading into earnings, Twitter rallied from $16 to $18.45 before crashing back down to $15.77 after the report.
  • Q1 2016: Twitter rallied from around $16 to $17.75 in the month heading into the report before immediately crashing to $14.86 in the aftermath.

With such a small sample size, it’s…

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