Looking At Twitter? Quarters 2 And 3 Could Be Key

Twitter, Inc. TWTR has recently fallen out of favor with many investors, having lost almost 60% of its value since April. But 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 dont produce whopping numbers in Q2 and Q3, I will no longer be in the position," he said.

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

What about Q1?

Udall called the current quarter a "White knucke 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" initiatiave are great changes to the company. The key for the short term will be to manage their guidance. 

"I think they’re going to hve a fine quarter," said Udall. "I hope they dont say anything positive about guidance. The last two times, they guided too high and that ended up creating disapointment in the next quarter."