Twitter Inc (TWTR): Four Analysts Initiate With Neutral Or Buy Rating

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Twitter Inc (NYSE:TWTR) continues to get attention from various analyst camps. This week analysts from at least four different firms have initiated coverage on it, and they’re split down the middle: two firms have a Buy rating, while the other two have what equates to a Neutral rating.

Twitter initiated with Neutral rating

The two firms which initiated with a Neutral rating are JPMorgan and Morgan Stanley. JPMorgan analyst Doug Anmuth and his team have a $40 per share price target on the stock. They believe that the company is indeed changing how people communicate and take in information. They also think that the social network is just in the first stages of monetization and that there’s plenty of room to take off. However, they initiated at Neutral because of the company’s current valuation and market capitalization near $30 billion.

Anmuth and his team see the critical driver for Twitter Inc (NYSE:TWTR)’s future as being scaling user growth. They note that the micro-blogging site’s 232 million user base is growing rapidly at around 40%, including 53 million U.S. viewers. They’re expecting to see monthly active users pass 500 million by 2018 but believe Twitter’s “real-time, news-driven appeal” will offer less broad-based interest than Facebook and other social networks. The analysts expect Twitter to see strong growth in average revenue per user and expect initiatives like Twitter Amplify and Twitter Cards to be key drivers in growth.

Twitter initiated with Equal-Weight rating

Morgan Stanley analyst Scott Devitt and his team initiated coverage of Twitter Inc (NYSE:TWTR) with an Equal-weight rating (which is similar to a Neutral) and no price target on the stock, although their base case is set at $33 a share. Like analysts at JPMorgan, they also believe Twitter’s current valuation is fair, although they remain positive on the company’s opportunities to expand.

They like the odds of Twitter being able to take some of TV’s ad share through its second-screen ad products. They expect to see continued benefits from the adoption of smartphones and are expecting Twitter to double its user base in the U.S. to almost 110 million by 2020. Note that this is significantly lower than the projection made by JPMorgan. They are estimating Twitter’s total addressable ad market as about $19 billion of “socially enabled digital advertising” by 2015. They will also consider $56 billion in worldwide display, rich media and online video to be potentially addressable. Twitter Amplify is also named as a  potential growth driver.

Twitter initiated with Buy rating

The two firms which initiated coverage of Twitter Inc (NYSE:TWTR) with a Buy rating are Goldman Sachs and Deutsche Bank. Goldman Sachs analyst Heath P. Terry and his team have a $46 per share price target on the stock. In spite of their Buy rating, they have a “Neutral coverage view” because they think there is “substantial long-term value” in the micro-blogging site’s potential to become the leading platform for real time mass communication.”

They also point to user growth and engagement as being key to Twitter’s success, as well as monetization. They also expect good things out of Twitter Amplify and Twitter cards.

Four reasons to buy Twitter

Deutsche Bank analyst Ross Sandler and his team are the most positive on Twitter Inc (NYSE:TWTR), initiating with a $50 per share price target and a list of four reasons they think investors should buy Twitter shares. They call it “arguably the best ‘play’ on mobile” in their coverage universe, citing 76% of traffic and 70% of ad revenues from mobile.

The analysts say they are “firmly” in the bull camp on Twitter. The four reasons they like Twitter so much are: 1) expected reacceleration in monthly average users, which they expect to hit 1 billion “eventually;” 2) “a long list of planned monetization improvements slated for the post-IPO period; 3) EBITDA growth which they believe “will top anything we’ve seen in the space for years; 4) and “moonshot-like” catalysts in Twitter Cards and Twitter Amplify.

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