Twitter Bull JPMorgan Projects 21% Upside For The Stock

Twitter Inc TWTR shares have showed solid momentum this year thanks to positive catalysts — and a JPMorgan analyst is confident the stock will make further gains.

The Analyst

Analyst Doug Anmuth reiterated an Overweight rating on shares of Twitter and increased the price target from $39 to $50, suggesting roughly 21-percent upside from current levels.

The Thesis

Twitter's ad momentum is strengthening, particularly among large marketers, Anmuth said in a Tuesday note, citing industry conversations.

Double-digit daily average user, or DAU, growth for six straight quarters; improving product for both users and marketers; a higher click-through rate and ad engagement; and better pricing amid a decline in cost per engagement have all served to increase Twitter's value for advertisers, the analyst said.

Although conceding that back-half comps are tougher due to early performance improvements in the second half of 2017, Anmuth said Twitter will benefit from the easing of TellApart headwinds and greater traction with top 100 marketers.

JPMorgan increased its estimates for the second half of 2018 and for 2019 by about 3 percent across both revenue and EBITDA on the basis of increasing confidence in ad revenue growth in excess of 20 percent in the coming years.

Despite expecting the company to expand headcount by 10-15 percent this year, JPMorgan also forecast margin expansion.

The 2018 FIFA World Cup is a big opportunity for Twitter, as the platform can serve fans in real time and engage them in conversation around matches, Anmuth said.

"Twitter's partnership with FOX Sports will provide near real-time highlights of every goal scored, and video is a major area of strength for Twitter, already driving more than half of the company's total ad revenue."

The Price Action

At the time of publication, shares of Twitter were rallying 6.77 percent to a three-year high of $44.22.

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