Twitter Inc Coverage Initiated With ‘Buy’ Rating

Twitter Inc Coverage Initiated With ‘Buy’ Rating

Twitter continues to garner the praise of analysts with its constant stream of new ad products and features. And the more analysts are becoming convinced that Twitter is worth the current valuation, the more sentiment on Wall Street is shifting toward the positive.

Twitter to benefit from online video ad shift

Jefferies analysts are the latest to turn positive on Twitter, initiating coverage of the company’s stock with a Buy rating and $65 per share price target. In a report dated April 1. Analysts Brian Pitz and Brian Fitzgerald and their team said they see great tailwinds in Twitter’s future from the shift toward online video ads and mobile.

They estimate that the U.S. online video market will be worth at least $17 billion per year by 2017. As many others have argued, they believe companies and brands will shift a significant portion of their TV ad budgets to online video in the next couple of years.

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Twitter’s Periscope a great benefit

They think Twitter is particularly well-positioned to take advantage of this shift. They note that the micro-blogging platform continues to unveil a steady stream of new products and expect it to be able to capture “a meaningful share” of online video ad spend.

In particular, they think the recently launched Periscope will assist in this area. Periscope is a live video streaming app that is designed to enable anyone to be a live news report. The Jefferies team said the app provides the one missing piece—video—of the puzzle and is capable of supporting massive global broadcasts.

The future of the global ad market

The analysts estimate that nearly a third (30%) of global ad spend will go to online advertising, an increase from about 25% last year. They add that total global online ad spend is increasing at a compound annual growth rate of 15%.

They believe the mobile segment of online ad spend will balloon upward rapidly with a compound annual growth rate of 41% over the next three years. The Jefferies team points out that this is especially good for Twitter because 88% of its ad revenue comes from mobile devices.

Twitter improves the user experience

While the online video ad market continues to grow, Twitter is also focused on improving the overall user experience. After all, a platform like Twitter is only as good as the value it can provide to advertisers. The Jefferies team expects the cumulative effect of all the micro-blogging platform’s changes to be improved user engagement, which in turn will raise the value of the ad products on the platform.

As Twitter management has been reminding investors of constantly, the platform touches far more than just its logged-in users. It’s estimated that Twitter has at least 500 million logged-out monthly unique users who consume the platform’s content through third parties, online searches and private sharing.

Additionally, they note that more than 700 million monthly unique users consume Twitter content through syndication. That’s compared to just 288 million monthly active users recorded directly by the company. Twitter has revealed deals to monetize syndication and will likely expand other efforts to monetize its non-core users going forward.

As of this writing, shares of Twitter were up 1.22% to $50.67 per share.

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