Stifel: The Good And Bad For Twitter's Advertising Business

Twitter TWTR was resumed at Stifel Nicolaus with a hold rating and $44 price target.

The Good

Analyst Scott Devitt notes that advertising revenue has increased during three of the past four quarters. There may be more upside: “We believe increased uptake of complementary TV campaigns along with emerging formats like mobile application install ads could lead to revenue outperformance in the short-term.”

In addition, advertising through MoPub and TapCommerce could boost reach while limiting inventory concerns.

Related: Stifel's Case For $1,600 On Priceline

The Bad

User engagement and growth are slowing, which raises concerns about ad inventory. “We believe product innovation driving improved reach / usage of the site may be necessary for Twitter to justify its current valuation.”

Price Action

The $44 price target was derived with a DCF and, “represents 14x 2015E EV / Sales and 66x 2015E EV / EBITDA.” Shares of Twitter were last trading at $44.11, up 0.7 percent in Wednesday’s session.