Morgan Stanley Reviews Engagement Monetization: Bullish On Facebook And Bearish On Twitter

Morgan Stanley's Brian Nowak commented on Facebook Inc FB's past and future outperformance of Twitter Inc TWTR.

Nowak applauded Facebook's strong daily user growth and engagement for 2Q, despite Snapchat concerns. The analyst was 8 percent above Facebook's Street estimates for adjusted earnings per share.

Technical Differences

Facebook is up ~15 percent year-to-date, but has only risen by 2 percent since the start of May. Twitter is still down 20 percent year-to-date, but has risen ~32 percent since the start of May. The analyst believes debates on whether Facebook was being negatively impacted by Snapchat and whether Twitter trends were bottoming out have led to the price movement difference between the two stocks.

Related Link: Facebook Is Bank Of America's Top Idea In Media

Snapchat Is No Threat For Facebook

"We address these debates and remain bullish on FB and bearish on TWTR," stated Nowak. The analyst didn't believe Snapchat was having a "material impact on FB's engagement or daily active user (DAU) growth."

Twitter Engagement Bottoming Out?

Nowak believes Twitter engagement did not bottom out and there won't be drivers for upward revisions in the second half of 2016. "Our user and app install analyses show continued user and engagement deterioration in 2Q:16, causing us to lower our '16 MAU and ad revenue estimates by 1 percent and 2 percent, respectively," said the analyst.

As a result, Nowak maintains his Sell rating on Twitter and a Buy rating on Facebook.

According to TipRanks, Brian Nowak is among the better analyst's covering Facebook and Twitter, with a 64 percent success rate and a +7.2 percent average return per recommendation. The analyst is ranked 409 out of 4081 analysts.

At Time Of Writing...

• Facebook was seen up 0.07 percent at $121.08.
• Twitter was up 0.99 percent on the day at $18.55.

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