Why This Analyst Is Upgrading Twitter Shares Following 18% Decline

In a report published Wednesday, analyst Brian Wieser of Pivotal upgraded

from Hold to Buy. The price target has, however, been lowered from $54 to $50. Despite the weak 1Q15 results posted by the company, the analyst believes that Twitter's long-term potential remains unchanged. The company reported its 1Q15 earnings significantly below the guidance, consensus and estimates. While the adjusted EBITDA came in above the guidance, it fell short of the estimates, and total revenues also came in well below the analyst's expectations, guidance and consensus. "The company's continued investment in sales and marketing efforts, ongoing expansion into new segments of advertisers, growth in spending with incumbent advertisers (especially large brands who are still working to figure out how to use Twitter as a marketing vehicle) failed to translate into the growth we expected," the analyst said. Twitter has revised its full year revenue guidance downward, while raising its 2Q15 revenue guidance. Pivotal has accordingly revised its revenue estimates to the lower end of the guidance. However, the long-term estimates remain unchanged, since "the long-term view we hold regarding Twitter's position in the advertising marketplace as an important niche proposition remains generally unchanged," the analyst explained. Pivotal expects the company's new initiatives to drive growth through 2015 and beyond, while the TellApart acquisition offers a "retargeting solution" for Twitter.