Bank Of America Bullish On Twitter Ad Testing

Twitter, Inc. TWTR traded higher on Wednesday on reports the company is experimenting with its ad load, and one analyst said Thursday that improving Twitter’s ad business is one of several reasons for investors to love the stock.

The Analyst

Bank of America analyst Justin Post reiterated his Buy rating and $46 price target for Twitter.

The Thesis

Twitter has confirmed it's testing higher ad loads on select users, and Post said the initial positive market reaction was appropriate.

“We remain constructive on potential content and ad improvements from increased testing by Twitter, a potential driver that gained visibility with the prototype app launch in March,” Post wrote in a note.

In addition to ad load testing, Post said Twitter is still testing and tweaking new app features as well, and management hinted on the first-quarter earnings call that prototype app testing is going well so far. Post said the new app should ultimately lead to better engagement numbers for the platform.

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So far in the second quarter, Twitter app downloads are up 13 percent, according to data from SensorTower. U.S. downloads are flat year over year, but international downloads are up 15 percent. Despite flat download growth, total U.S. minutes spent on the platform were up 6 percent in the month of April.

Post said Twitter’s valuation is elevated relative to its peer group, but the 2020 U.S. presidential election and the 2020 Olympic games should help drive acceleration in the company’s ad numbers starting in the second half of the year.

Price Action

After gaining 3.8 percent on Wednesday, Twitter's stock was down 3.3 percent at $37.30 per share Thursday.