Is It Time For A Twitter Rebound?

Sean Udall, the Tech Stock Strategist, recently took a crack at deciphering the unpredictable trading action in Twitter Inc TWTR in 2017. Twitter shares have been as high as $25.25 and as low as $14.12 and everywhere in between in the past year on flurries of buyout rumors, fleeting signs of a return to growth, disappointing earnings numbers and other headlines.

According to Udall, Twitter’s near-term technical outlook may not be as bad as it seems following the company’s disappointing Q2 earnings report. In fact, he notes that Twitter’s underlying fundamental picture has been on the upswing for the past two quarters. In the most recent quarter, EBITDA guidance increased by more than 60 percent.

If Twitter can continue that positive fundamental momentum, investors will eventually realize that the stock is trading at a major discount to other tech leaders, Udall said.

Related Link: Earnings Crash Is Just Twitter Being Twitter

While traders focused on Twitter’s flat-lining subscriber growth, other financial metrics from the quarter, including revenue and earnings, topped Wall Street’s expectations.

One of the most overlooked factors, Udall said, is that Twitter’s ad pricing seems to have finally stabilized and could be poised to start heading higher in the quarters ahead. Even if Twitter’s user growth has peaked, the company may still have huge growth opportunities in the data licensing business.

From a technical standpoint, Twitter’s bounce off of $15.67 may be a sign that the stock has once again bottomed. If the $15.67 level holds, bulls can take comfort in the fact that the level still represents “higher low” than the dip to $14.12 back in April.

“Bottom line, we see this story over and over again in tech,” Udall said, mentioning names like Autodesk, Inc. ADSK, Western Digital Corp WDC, Micron Technology, Inc. MU and Yelp Inc YELP.

“Look at all those names now,” Udall said. “And I mention those specifically as TWTR’s TAM is massively larger than any of them.”

Joel Elconin contributed to this story.