Twitter Inc (NYSE:TWTR) is evolving as a social platform for public self-expression and also holds potential to capitalize on the opportunity, but sluggish user growth and premium valuation has contained the optimism of the analysts at Raymond James. The micro-blogging site will post its second-quarter 2014 results on July 29th.
Twitter loved by celebrities
Going by the four important performance metrics such as public, real- time, conversational and distributed, Twitter has proved itself as a leading social and mobile platform for public self-expression and real-time conversation, believe Raymond James analysts Aaron Kessler and Ben Cohen, in a report dated July 24, 2014.
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In the first-quarter of 2014, the company had 250 million monthly active users, who post 500 million tweets per day. Twitter has been a preferred platform of the influential individuals and organizations like world leaders, celebrities, athletes, media outlets, and brands, as well as, millions of platform partners such as publishers, media outlets and developers.
Analysts noted in their report that Twitter is capable of driving its ad revenues per MAU from current levels, which were at $2.79 for U.S. and $0.34 for International in the first-quarter (vs. Facebook’s MAU of $5.16 for U.S./Canada and $1.17 for International). Also, the company can narrow the difference with improved targeting, salesforce expansion, new ad formats and increasing ad load, as per the report. Ad revenue per 1,000-timeline views is expected to increase 67% and 31% in 2014 and 2015.
Limited target market
Decline in the user growth rate is one of the key issues for the investors today. Twitter is similar to the Facebook Inc (NASDAQ:FB) in some aspects, but it is frequently used as an information or interest network instead of a social network, believe analysts. The online social platform is in level with the other information and news channels, which confines the target market in some aspects, as non-users may be satisfied with current methods used to receive information.
Raymond James analysts initiated coverage on Twitter with a Market Perform rating. The micro-blogging site is trading at a premium to peers, to which analysts believe “is warranted given Twitter’s faster user growth (we estimate 59% for 2014-2015 vs. 29% for peer group), we believe Twitter’s higher growth outlook is reflected at current valuation levels.”