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Investors, Get Your Pencils Ready: 2016 Holds Big Tests For Twitter

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Investors, Get Your Pencils Ready: 2016 Holds Big Tests For Twitter
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Twitter Inc (NYSE: TWTR) has recently fallen out of favor with many investors, having lost almost 60 percent of its value since April. However, there's hope on the horizon.

Jack Dorsey's company could see significant growth this year on the heels of the 2016 Olympics and a presidential election that's only getting warmer, according to Quantum Trading Strategies CIO Sean Udall. The increased activity that comes with those events will be a big test for Twitter.

"If they don't produce whopping numbers in Q2 and Q3, I will no longer be in the position," he said.

Related Link: Is Twitter Really Considering A 10,000 Character Tweet Limit?

Not Twitter's Fault

The reason Udall sees potential in Twitter is because he doesn't think their recent struggles are necessarily the company's fault.

"It seems like every time Twitter starts getting some momentum, we all of a sudden get some external shock in the market," he told Benzinga on Wednesday's #PreMarket Prep.

"Just when these stocks find really firm support, we’re sort of dealing with a mini market crash again."

That logic applies to this week particularly, which has seen Twitter fall below the recent $22.20 support level.

What About Q1?

Udall called the current quarter a "white knuckle period" for the company, saying they probably won't get above $25 before earnings are released, but that they could end up beating by a little.

Fundamentally, he believes the recent news of a character limit increase and the new "conversational ads" initiative are great changes to the company. The key for the short term will be to manage guidance.

"I think they’re going to have a fine quarter," said Udall. "I hope they don't say anything positive about guidance. The last two times [they said positive things about guidance], they guided too high and that ended up creating disappointment in the next quarter."

Posted-In: Analyst Color Long Ideas News Exclusives Pre-Market Outlook Trading Ideas Interview General Best of Benzinga

 

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