It's been a rough year for Twitter. The company's stock fell more than 5 percent on Monday, reaching an all-time low since it started trading publicly in November 2014. But one trader says Twitter will make a full comeback by 2017.
"In the short term, there's nothing really saying Twitter can reverse and go higher," Andrew Keene of KeeneOnTheMarket.com said Monday on CNBC's "Trading Nation." "However, I think it's a great longer-term play."
The social media firm's first-quarter earnings report prompted a sharp drop of 18 percent in the company's share price. More recently, Twitter reported earnings that beat expectations in July, but the stock fell more than 14 percent on disappointing active-user numbers. The stock is down more than 18 percent year-to-date.
Without naming a specific catalyst for Monday's selloff, analyst Ronald Josey of JMP Securities said the stock's overall weakness is due to continued concerns over the company's growth, product launches and search for a new chief executive.
But Keene said the social media firm still has a lot of potential with its user base of 316 million monthly active users. He said the company will rebound once it fixes its monetization problems, or it could be a potential buyout target.
"I think it will reverse and over time, I'm not talking about the next day, in the next week even, but I think it can recuperate to about the $45 dollar level," Keene said.
For his trade, Keene is buying the January 2017 35-strike call option and selling the 45-strike call option for $2.50. Keene's price target is $45 by January 2017, and his trade is profitable if Twitter rises above $37.50 by that time.
"I can be initially wrong because the price action and price momentum is to the downside on the daily and weekly chart," Keene said.
For now, analysts aren't too positive on Twitter's outlook. Out of 40 analysts that cover the stock, 63 percent have a "hold" rating, with an average target price of about $40, according to FactSet.
"Twitter can be a successful internet player with highly unique characteristics, but if the addressable audience is going to remain limited, it stifles Twitter's long-term earnings power," Nomura's Anthony DiClemente wrote in a research note Wednesday, after cutting Twitter's target price following earnings to $33 from $39.
A Stifel report from last week also expressed concern about dwindling users.
"We have long held that revenue growth and user growth would have to converge but even we did not expect it this soon," Stifel's Scott Devitt wrote. "In short, we continue to believe the company has a product problem."
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