SunTrust's Peck Upgrades Twitter to Buy, Shares Jump ~3%

Twitter

has been upgraded from Neutral to Buy by SunTrust analyst Bob Peck Monday morning. The analyst lowered his price target from $50 to $45. Peck noted Twitter is one of the rare “platforms of the internet,” meaning platforms on the size and scale of Amazon, Google, LinkedIn, etc are difficult to build. Speaking to the benefits of owning one of the platforms, Peck stated “The leverage that can be created by these unique assets can be financially powerful and provide interesting optionality over time”. Addressing the decrease in Twitter's user growth, Peck stresses the importance of Twitter's capability to rapidly expand revenue growth and expanding profitability by narrowing the 50% monetization gap to Facebook on a per MAU (Monthly Active User) basis. Peck estimates Twitter could “monetize revenues by 9% of the rate of Facebook”. Twitter's first-quarter 2014 revenues of $250 million against Facebook's $2.5 billion in revenues shows Twitter is monetizing at 10 percent of Facebook. Peck also noted his industry contacts commenting on the increasing strength of advertiser relationships with Twitter nascent ad platform. Also touching on Twitter's lock-up period expiring, Peck made the case that money managers previously constrained by the available liquidity (share float) may be more likely now to build meaningful positions as the lock-up period expiration released more shares into the marketplace. The recent correction in Twitter's share price as reestablished attractive purchasing metrics, according to Peck. Twitter is trading around $33 Monday morning, up 3 percent from Friday's close of $32.05. Peck's new price target implies potential price appreciation of more than 35 percent from where the stock is currently trading.