Twitter Inc Upgraded to Hold with $42 Price Target

An analyst at Pivotal Equity Research upgraded his stock rating for Twitter Inc (NYSE:TWTR) to Hold and raised his price target to $42 citing the reason that the company’s third-quarter earnings results was “solid overall.”

Over-reaction sent Twitter towards fair value

In a note to investors, Pivotal Research analyst Brian Wieser emphasized that his confidence on the long-term potential of Twitter Inc. (NYSE:TWTR) was improved citing the reason that the “continually acted in a solid strategic view and capable execution of revenue generation” over the past year.

Charlie Munger: Invert And Use “Disconfirming Evidence”

Charlie MungerCharlie Munger is considered to be one of the best investors and thinkers alive today. His thoughts and statements on investment research, investment psychology, and general rational behavior are often incredibly insightful. Anyone can learn something from this billionaire investor and philosopher. Q2 2020 hedge fund letters, conferences and more If you’re looking for value Read More

According to Wieser, the stock price of Twitter Inc (NYSE:TWTR) declined after its earnings results for the third quarter because of over-reaction. He pointed out the microblogging company’s financial performance was “solid overall.” Wieser said the over-reaction sent Twitter Inc (NYSE:TWTR) towards fair value.

“Valuing Twitter is subjective given the company’s early stage of development. A view on its fair value depends on long-term expectations and the appropriate metrics which drive potential,” said Wieser.

4Q guidance was perceived negatively

Wieser noted that the fourth quarter guidance of Twitter Inc. (NYSE:TWTR) was viewed negatively in comparison with expectations. He also recognized the fact that their current estimates are slightly lower due to the elimination of possibly premature expectation of incremental revenue associated with Twitter’s Publisher Network.

The analyst said, “Still, results provided us with evidence that our approach to forecasting is reasonable.” He explained that they used a lagging multiplier against sales and marketing spending to predict ad revenue growth near-term.

He emphasized that they were incrementally positive on 2015 for Twitter Inc (NYSE:TWTR) because its revenue per dollar of sales and marketing spending went up. He added that its adjusted profit margins for the current period were better than their estimates.

Furthermore, Wieser believed that the recently announced platform for app developers called Fabric, which includes different features such as analytics, embedding of tweets and monetization through MoPub looks positive.

Moreover, the analysts said the commentary of the management of Twitter Inc (NYSE:TWTR) were helpful in conveying how they intend to develop products for a broader audience, and their suggestion that bot traffic did not grow was positive.