Shares of Twitter (TWTR - Free Report) surged over 5.5% on Tuesday to hit a new 52-week high of $43.99 after J.P. Morgan (JPM - Free Report) analysts raised their price target for the social media company, citing Twitter’s advertising growth as a major reason for their more upbeat outlook.
J.P. Morgan analysts upped Twitter’s price target from $39 per share to $50 per share, which marks a 21% premium over Monday's closing price. "We are raising our estimates on TWTR shares as we believe advertising momentum is strengthening, particularly among large marketers," analyst Doug Anmuth said in a note to clients Tuesday. "Industry conversations suggest the value for advertisers on TWTR is increasing, driven by double-digit DAU [daily average users] growth (6 straight qtrs), improving product for both users & marketers."
The analyst also reiterated his "Overweight" rating for Twitter stock. Anmuth noted that the upcoming 2018 FIFA World Cup will likely boost the company’s ad sales because of Twitter’s real-time highlights video partnership with Fox (FOXA - Free Report) —which is broadcasting the world’s biggest sporting event for the first time (also read: From TV Deals to VR, Here's Everything Investors Need to Know About the FIFA World Cup).
"We believe Twitter is uniquely positioned as the real-time broadcast and communications network, making it complementary to all other forms of media, including TV. Twitter is also well positioned to benefit from the large shift in dollars toward mobile and native," Anmuth stated. "We believe Twitter has multiple growth drivers ahead, and we believe the company is well positioned to grow its ad revenue next year as the product continues to improve."
Why It Matters
J.P. Morgan analysts upped their price target almost completely on the back of Twitter’s advertising growth picture, and noted one specific partnership for a month-long event as an example. For some, this might seem a little one-track-minded.
But the World Cup is simply a microcosm of Twitter’s overall standing as a complement to live entertainment and a vital tool for up to the second information. And advertising is how the company makes most of its money.
Twitter’s advertising sales—which accounted for roughly 86% of Twitter’s $665 million total Q1 revenues—climbed 21% from $474 million in the year-ago period to $575 million. Meanwhile, the social media company’s international ad revenue surged 52%.
Going forward, investors should expect to see Twitter’s adverting business become even more lucrative as it expands it live video reach. Twitter streamed more than 1,300 live broadcasts in Q1 and also announced that it signed more than 30 new partnerships in the first quarter, which includes deals with the likes of Fox Sports, NBCUniversal (CMCSA - Free Report) , Viacom (VIAB - Free Report) , Disney (DIS - Free Report) —which includes a ton of ESPN programming—and many more.
Twitter’s push is part of a larger effort by social media companies, such as Facebook (FB - Free Report) , to offer more live video content.
Twitter is expected to see its Q2 revenues pop by nearly 22% to hit $698.93 million, based on our current Zacks Consensus Estimates. For the current fiscal year, Twitter revenues are projected to hit $2.93 billion, which would mark a roughly 20% surge.
Meanwhile, the company, which reported GAAP profits for the first time in Q4, is expected to see its adjusted quarterly earnings skyrocket 112.5% to $0.17 per share. The company’s fiscal 2018 earnings are also projected to soar by 70% to reach $0.75 per share.
Investors should also note that Twitter has received 10 earnings estimate revisions for Q2, with 100% agreement to the upside, all within the last 60 days. Meanwhile, during this same time frame, Twitter earned 13 upward revisions against zero downgrades for fiscal 2018.
Twitter is also currently a Zacks Rank #1 (Strong Buy) and sports an “A” grade for Growth in our Style Scores system.
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