Twitter Inc. (NYSE: TWTR) has faced many questions over the years about its user base and how to monetize it. Also, coming off the Trump administration, many were concerned that engagement on the platform would drop off. One analyst thinks differently.
Truist Securities has upgraded Twitter to a Buy rating from Hold and raised its price target to $74 from $64. That implies upside of 21% from the most recent closing price of $61.26 a share. The brokerage firm noted that its upgrade is predicated on a few things:
- Higher revenue growth ests (25% CAGR thru FY23 vs. 20% previously),
- The most exciting product roadmap we’ve ever seen out of the company with Topics, Fleets etc, on the back of recent tangible tech platform and operational improvements,
- Double digit growth in mDAUs and greater traction with advertisers, particularly DR and SMEs; and
- Attractive valuation with the stock off 22%+ since AD on 2/25, trading at 8x EV/Rev and 20x EV/Adj. EBITDA on our FY22 ests.
Overall, Truist has grown incrementally positive on Twitter. Tangible progress in the past 12 months has yielded an acceleration in year-over-year user growth of monetizable daily active users (mDAUs). The fourth quarter of 2020 also had the fastest year-over-year revenue growth in over two years.
Additionally, on Twitter’s Analyst Day in late February, management unveiled a new outlook for 2023 for mDAUs of over 315 million and revenue of over $7.5 billion, materially above consensus estimates, reflecting its confidence in the sustainability of its current momentum, its product roadmap and monetization strategy.
Truist further described its bull case and bear case for Twitter:
Bull/Bear cases point to favorable $86/$55 risk/reward scenarios. In our Bull and Bear scenario analysis (see Fig. #3 for details), we find that the upside represents about 40% (at $86) from Twitter’s current stock price (as of 3/26 close) vs. a 10% downside (at $55) for the bear case. Specifically, our Bull case scenario assumes that the company achieves its stated FY23 targets of 315M+ mDAUs (19% CAGR) and revenue of $7.5B+ (27% CAGR). Our bear case calls for 256M mDAUs (10% CAGR) and revenue of $6.29B (19% CAGR) in FY23.
Excluding Monday’s move, Twitter stock had outperformed the broad markets with a gain of about 132% in the past 52 weeks. Year to date, the share price was only up about 13%.
Twitter stock traded up about 2% to $62.72 on Monday, in a 52-week range of $22.36 to $80.75. The consensus price target is $69.40.