CRT Reiterates On Twitter Following Analyst Day

CRT Capital commented Thursday on the Twitter Inc TWTR analyst day. The firm reiterated its Buy rating and $54 price target.

Analysts Neil Doshi and Robert Coolbrith noted that “TWTR’s goal is to have the largest daily audience in the world and be one of the top revenue generating Internet companies.”

Doshi commented that “Management shared three key initiatives that Twitter is taking in order to remain on track to achieve their stated goals:

1) Strengthen the core by improving new user experience and enhancing consumer functionality;

2) Reduce barriers to consumption which includes delivering a consumption-oriented experience for logged-out users;

3) Delivering new services like Fabric (TWTR’s suite of platform services for mobile app developers) and apps beyond the core Twitter app.”

Doshi concluded that while “TWTR management took pains to emphasize that their analysis was purely hypothetical, the “structural scenario” laid out by management outputs $11.4B in revenue (at some point in the future), assuming 1) 5 percent ad load, 2) 560M MAU, 3) a modest improvement in DAU:MAU ratio and 4) monetization of the logged-out user base at an annual ARPU of $2.50.

“More concretely, TWTR did revise its LT margin target upward. TWTR now expects LT EBITDA margin in the 40-45 percent range, up from 35-40 percent previously.

“We believe that the product enhancements and features could be a catalyst for MAU and daily visitor growth in 2015, and with new ad products becoming more material, these ads could provide incremental upside to revenue in 2015 and beyond,” according to the analyst report.

Twitter recently traded at $42.15, down 0.92 percent.