Twitter Inc (NYSE:TWTR) was assigned a Market Outperform rating and a price target of $49 per share by JMP Securities on Monday. JMP analyst Ronald Josey believes the micro-blogging site is heading toward stable user growth and that this is not reflected in the current share price.
Many positives for Twitter
Josey noted the micro-blogging site has more than 284 million active users who generate more than 500 million tweets per day, making Twitter attractive to users who want instant news and information on most events across the world.
He expects Twitter to expand its user base to slightly more than the consensus estimate. He’s projecting that monthly active users will increase 7.5 million compared to Street estimates of 7 million. In the year 2015, he expects the company to add 49.5 million users, a drop from 50 million this year. For fiscal 2016, the user growth rate might increase to 51 million, suggests the analyst.
Josey stated that with “unaided brand awareness of 80 percent, we believe Twitter and its ‘#’ are now firmly ingrained in global culture.” The JMP analyst is upbeat on Twitter, noting there is a high barrier to entry given the global reach and the inherent value of real-time web for Twitter. Other positives listed by the analyst are differentiated content, improvement of the product, which would lead to improved engagement and new users, deep advertiser relationships, early days in monetization, and expanding margins.
The analyst noted that Twitter might face some risk in the short term around fourth quarter MAU growth, but “we believe this is priced in at current levels and we expect MAUs to rebound in 1Q15 as overall engagement benefits from Twitter’s product improvements.”
Twitter stock has seen some correction since the company’s analyst day, and there are some concerns around usage, however, the analyst notes that the product is improving and offers differentiated content. He believes the company has a differentiated service for the real-time web. Additionally, the analyst thinks it is a good time to invest, considering the increase in MAUs. The micro-blogging site is investing in its product, which the analyst feel will pay off in 2015.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ronald Josey has a total average return of 9.8% and a 51.4% success rate. Josey has a 0% average return when recommending TWTR, and is ranked #688 out of 3429 analysts.