Twitter Is A Value Social Media Stock, Oppenheimer Says In Upgrade

Twitter Inc. TWTR reported earnings this week that topped estimates in both earnings and revenue due to increased advertising proceeds. 

The Analyst

Oppenheimer analyst Jason Helfstein upgraded Twitter from Perform to Outperform and set a $37 price target.

The Thesis

Twitter has appeared to stabilize pricing and expenses, Helfstein said in the upgrade note. (See his track record here.) 

“Within the scope of social media, we believe TWTR shares offer reasonable value with reduced execution risk. Q3 revenue and profit nicely exceeded expectations, with Q4 revenue in-line and margin guidance ahead," the analyst said. 

Twitter signaled that daily active users should continue to grow — at a slower pace — and expenses should grow more slowly than revenue in 2019, according to Oppenheimer. 

The social media platform posted a year-over-year revenue increase of 29 percent, as well as a 31-percent surge in ad revenue and 24 percent increase in data licensing.

“While new features have improved user engagement, reflected in DAU growing faster than MAU, we are concerned that the main driver of ad engagement is lower-priced ads (i.e., improving ROI), which needs to stabilize in order to drive growth in 2019," Helfstein said.

Twitter shares are trading at a premium to Facebook.com, Inc. FB with in-line EBITDA growth, the analyst said. 

The main catalyst for Twitter's valuation include evidence of monthly active user and daily active user growth as well as the impact of advertising initiatives, according to Oppenheimer. 

Price Action

Twitter shares were up 1.26 percent at $32.20 at the time of publication Friday. 

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