Twitter Inc (TWTR) Coverage Initiated With A “Neutral”: Sterne Agee

Twitter Inc (TWTR) Coverage Initiated With A “Neutral”: Sterne Agee
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Twitter Inc (NYSE:TWTR) is one of the strongest players in online social networking with a monthly active user base of 232 million including 53 million in the United States, according to Sterne Agee analysts Arvind Bhatia and Brett Strauser.  The analysts state that the company will grow significantly with an increased rate of growth compared to other social media rivals. Also, Twitter’s ‘Mobile First’ strategy will benefit it substantially in the future.

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The report reveals that international markets are an important opportunity, but there are also risks for the company as it grows its user base and revenue base.

International market provide further opportunities

The microblogging site enables users to create, distribute and discover content in real-time on the web and on mobile devices. Analysts at Sterne Agee note in their report that mobile  contributes 76% of total monthly active users. Also, Twitter earned more than 70% of its revenue from  mobile advertising in the latest quarter. Twitter’s international user base is 77% of total, but only 25% revenue is contributed from this base, which reflects room for further growth.

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Twitter good for advertisers

Advertisers can squeeze maximum benefit from Twitter’s user base and can convey messages and receive feedback from their target customers for free. Also, Twitter offers paid advertising services through which advertisers can reach masses.

Twitter Inc (NYSE:TWTR)’s platform partners include publishers, media, outlets, and developers, who are connected with Twitter through an application programming interface utilizing the company’s page as a free distribution channel for their content. The social networking site is planning to expand its integration to more API, and enable its partners to offer more through the channel.

Licensing revenues less but significant

Twitter earned 11% of its revenue through data licensing, which although less than what it earned from advertising, is still significant. Twitter sells data licenses through which it conveys real time analytics about user interactions with the platform to the data partners. Twitter’s top five data partners accounted for roughly 73% of its data licensing revenue in the first 9 months of 2013.

According to the analysts, Twitter is valued around $25 to $32. The upside case values shares at $33 to $48 in the next 12 to 24 months, while the downside case is worth $13 to $15. Twitter shares are “trading at a significant premium to its high growth social media peers” and Sterne Agee analysts have initiated coverage with a Neutral rating.

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