Why Key Analyst Sees Twitter Worth 50% More

Media

Published: October 8, 2015 12:15 pm

In just the past week alone, Twitter Inc. (NYSE: TWTR) has been incredibly active — whether it is announcing Jack Dorsey as permanent CEO or Saudi Prince Alwaleed bin Talal disclosing a 5.17% stake in the company. As a result of this heightened activity and recent underperformance, one key analyst firm issued a call that sees Twitter rising by 50% or more.

According to Argus, the board’s decision to reinstate Jack Dorsey as CEO is a bet on his ability to rekindle this important operating metric, as well as to discover and invest in the appropriate adjacencies for the Twitter platform.

Meanwhile, Prince Alwaleed’s increased commitment to the company may help to boost institutional ownership and dispel some of the skepticism surrounding Twitter. In Argus’s view, Twitter has a highly valued global brand. The firm expects the company to rekindle growth and fully develop a strong franchise, but it believe that this process will take longer than earlier envisioned.

Argus sees the relative underperformance in Twitter shares as a favorable entry point for investing in what it regards as a durable Internet brand with significant growth opportunities.

In its report, the independent research firm said:

In our view, Twitter has a highly valued global brand. We expect the company to rekindle growth and fully develop a strong franchise; but we believe that this process will take longer than earlier envisioned. Relative underperformance in Twitter shares has created a favorable entry point for investing in what we regard as a durable internet brand with significant growth opportunities.

As a result, Argus reiterated a Buy rating for Twitter with a $45 price target, implying an upside of 50% from current prices.

Also the firm’s 2015 earnings per share (EPS) forecast is $0.34. For 2016, Argus is modeling 49% revenue growth, to $3.35 billion, and EPS of $0.60. The long-term EPS growth forecast for Twitter is 12%. Consensus estimates from Thomson Reuters call for $0.34 in EPS for 2015, as well as $0.62 in EPS on $3.23 billion in revenue for 2016.

Shares of Twitter were up 1.9% at $30.41 midday Thursday. The stock has a consensus analyst price target of $38.23 and a 52-week trading range of $21.10 to $55.99. Shares are down 15% year to date, and it is lagging in its peer group of six Argus-covered social media and internet service providers, which were up 14%, primarily on the strength of Facebook, Google and Amazon.

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