3 Reasons Why Goldman Sachs Is Incrementally Bullish On Twitter

​Goldman Sachs reaffirmed a bullish view of Twitter Inc TWTR on Thursday, raising its estimates with an eye on 2020.

The Analyst

Goldman Sachs’ Heath Terry reiterated a Buy rating on Twitter and raised the price target from $40 to $55.

The Thesis

Twitter shares are up over 87 percent this year, significantly outperforming the market as a whole. Yet Terry said Wall Street is still underestimating the company's ability to follow through in three key areas. (See the analyst's track record here.) 

• Improving user engagement through new features and information quality initiatives.
• Monetizing engagement as advertisers utilize new targeting and measurement functionality.
• Leveraging operating expenses as incremental revenue flows through.

Goldman’s recent advertiser checks and traffic data suggest Twitter’s information quality initiatives will not have the negative impact investors have been expecting recently, and will ultimately be positive for the company.

Terry raised 2018 to 2020 revenue and adjusted EBITDA estimates by an average of 4 percent and 6 percent, respectively. Also of note: the analyst’s decision to lower Twitter’s acquisition prospects from high, at 30-50 percent, to a low zero to 15 percent, citing the company’s size and strong independent growth outlook.

Price Action

Twitter shares were trading 3.19 percent higher at $45.27 at the time of publication Thursday afternoon. 

Related Links:

Nomura Bullish on Alphabet, Facebook, Spotify: 'Still Some Room For Growth'

Twitter Bull JPMorgan Projects 21% Upside For The Stock

Photo courtesy of Twitter.