Twitter Inc (NYSE:TWTR) shares continue to hover just under the $60 a share mark, and strategists at MKM Partners believe that this momentum is going to continue for some time. In fact, they think the micro-blogging site has “the best fundamental momentum among Internet leaders.” They still have a Buy rating on Twitter, even though they say its stock is “very expensive.” In spite of that high price, they believe it is still discounting “significant growth and earnings power.”

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Acceleration ahead for Twitter

Managing directors Rob Sanderson and Jim Strugger say even though Twitter Inc (NYSE:TWTR) has posted 105% revenue growth over the last two quarters, they think the company could accelerate its growth even more. They pointed to five main factors which could speed up its growth: international monetization, new types of ads, better analytics and targeting tools, AdMob integration and possible rebounds in user growth.

What might happen to Twitter stock?

The MKM team believes Twitter will continue to “consolidate / be volatile” around current levels into January. They said they wouldn’t be surprised if Twitter shares fell a bit toward mid-January if investors become worried ahead of the company’s first public earnings report. They say shares could dip into the middle $40 range if Twitter’s results are just in line on revenue and user growth.

On the other hand, they believe Twitter stock could trade into the $60 range if the company showed accelerating top-line growth in its first public report. They see the same possibility if Twitter reports “a notable acceleration” in the number of users.

Options for Twitter shares

The team at MKM isn’t adjusting their target price of $50, even though they remain Buy-rated on the company’s stock. They are recommending a couple of options trades, however. They suggest that investors could sell the Jan. 14 $60 strike covered calls at $2.10. This approximately 4% yield carries a commitment to sell if the stock hits $60 before the fourth quarter report.

They also said investors might consider buying the Feb. 14 $62.5c / $52.5p / $42p put spread, thus committing to selling their underlying position at $62.50 in exchange for being fully hedge between $52.50 and $42.

Growth versus momentum investors

The firm also provided some recommendations for growth and momentum investors who are interested in Twitter Inc (NYSE:TWTR). They suggest that growth investors step in because they’ll need to build exposure if they aren’t in the stock currently, but they admit that this will be more difficult because of Twitter’s high valuation. Momentum investors are the ones pushing shares higher, and unless key metrics either reverse or show signs of slowing down, they don’t see “a material correction” in Twitter’s valuation any time soon. Over the next five years, they believe the company can grow into a market capitalization of between $75 billion and $98 billion.

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