After three years of disappointment for Twitter Inc (Nasdaq: TWTR) investors, the tide may have finally turned for the company in 2017. Twitter stock jumped more than 8 percent on Monday after J.P. Morgan analyst Doug Anmuth upgraded the stock to “overweight” and named it one of the firm’s best stock ideas for 2018.
Following Monday morning’s big gain, Twitter stock is now on track to finish 2017 up more than 47 percent, its first calendar year gain since the company went public in November 2013.
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Despite a massive base of more than 300 million users, Twitter has struggled to keep pace with Facebook ( FB) in adding and monetizing users. In the most recent quarter, Twitter reported a 4 percent year-over-year decline in revenue and missed consensus expectations for monthly active user growth.
However, Anmuth says there are four reasons Twitter’s story could change starting in 2018. First, Twitter will begin to reap the rewards of its push into live streaming video. Second, Twitter’s daily active user growth should accelerate to 10 percent in 2018. Third, J.P. Morgan estimates Twitter will grow full-year 2018 advertising revenue by 8 percent. Finally, Anmuth says Twitter will be “GAAP profitable” for the first time.
“We believe both the TWTR story and financial results will strengthen over the next year as the company continues to build on its differentiated value proposition for users & returns to revenue growth,” he wrote in the upgrade note, according to CNBC.
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Anmuth says investors shouldn’t be deterred by Twitter’s huge rally in the second half of 2017. Even with the stock up 33 percent in the past three months, he says there is still plenty of long-term value for Twitter heading into a pivotal year for the company.
“We believe increasing traction with both users and advertisers will drive upside to 2018 consensus (we are 4 percent above on revenue & 15 percent on EBITDA) and investor sentiment around TWTR remains mixed,” Anmuth says.
In addition to the upgrade, J.P. Morgan has raised its price target for Twitter stock from $20 to $27.
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Twitter Inc (TWTR) Investors Have Reason for Hope in 2018 originally appeared on usnews.com
