Twitter Inc. shares rebounded to a record high on Friday as investors cheered the company’s positive growth targets, but some Wall Streets analysts are buying them.
The social media company aims to double revenue to $ 7.5 billion by 2023 from the current $ 3.7 billion, and investors seem to like the optimism the company showed during its Analyst Day presentation with a forecast $ 1 billion above that Consensus view lay. Twitter
TWTR, + 4.14%
Shares rose 3.7% on Thursday and rose 4.5% towards a record close in Friday’s midday trading.
MoffettNathanson analyst Michael Nathanson was a bit cautious after Twitter’s analyst day. “While we believe that Twitter can maintain robust user growth in light of its low market position today, we believe monetization will be the bigger open question,” MoffettNathanson analyst Michael Nathanson wrote in a statement to customers on Friday.
According to Nathanson, Twitter is positioned for strong growth over the next year as the company faces easy comparisons due to pandemic commercial breaks in the first half of 2020 as well as events like the Olympics that could lead to heavy brand spending. However, according to Nathanson, Twitter’s status as a “branded” platform can severely limit its ability to increase average revenue per user, while Peers Snap Inc.
SNAP, + 3.38%
and Facebook Inc.
FB, + 3.15%
have greater exposure to the rapidly growing direct response advertising segment.
He rates Twitter’s stock as neutral with a price target of $ 65.
Read: Snap’s big sales ambitions are cheering
Daniel Salmon, analyst at BMO Capital Markets, wrote that Twitter’s revenue target implies an average annual growth rate of 26% and means that Twitter “expects to go from a stock loser to a stock winner in the $ 150 billion digital display [total addressable market.”
Given that Twitter “has limited exposure to some of the hottest growth areas” like connected television and retail media, the target “is a tall order” but potentially achievable depending on the company’s execution.
“The stock already embeds a lot of enthusiasm for this opportunity,” Salmon wrote, while maintaining a market perform rating on the stock and lifting his price target $80 from $75. “We’d look for a pullback or checks indicating faster-than-expected execution to get more proactive.”
Pivotal Research Group analyst Michael Levine was more optimistic, writing that the company’s commentary “reaffirms [his] Conviction ”in the potential of Twitter.
Although direct response ads only made up 15% of sales last year, Twitter ultimately wants a 50/50 split between direct response and branded advertising. The company has “a tremendous direct reply opportunity that has largely gone untapped,” wrote Levine, emphasizing the company’s stance that it will expand and create more of its direct reply offering beyond advertising products such as mobile app promotion (MAP) and website clicks Sources of income.
Levine was also optimistic about Twitter’s ability to expand its exposure to small and medium-sized businesses, a market segment currently dominated by Google, from Google, from Facebook and Alphabet Inc. He has a buy recommendation for the stock and increased his price target from USD 77.25 to USD 95.00.
Twitter stock is up 68% over the past three months as the S&P 500
has increased by 6%.