Twitter Upgraded By Bob Peck, Notes 'Series Of Catalysts To Come Soon'

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SunTrust Robinson Humphrey's Bob Peck is no longer advising his clients to sit on the sidelines when it comes to owning shares of Twitter Inc TWTR.

In a report published Monday, Peck upgraded Twitter to Buy from Neutral with an unchanged $38 price target with the issue down roughly 50 percent from the end of the first quarter. The analyst added that a series of "positive catalysts," coupled with a now "attractive" valuation has resulted in a new "cautiously optimistic" view of owning the stock.

Peck said Twitter recently started (or is about to roll out) many new partnership initiatives that could boost user and engagement growth in 2016. The initiatives include: Google desktop and mobile search results, Project Lightning, additional deals similar to Flipboard, initiatives to target the company's logged-out users, and mining the churned one billion user base.

See Also: Why Twitter Is A 'Disaster'

In addition to new initiatives, Peck noted that Twitter has several monetization catalysts that are coming up. These initiatives include: the Doubleclick partnership, e-commerce Buy-button ads, video ads, improved targeting from the TellApart acquisition, Twitter Audience Platform, search and carousel ad units.

With the new initiatives in both partnerships and monetization, the analyst is expecting a 22 percent growth in Twitter's monthly active user base and a 15 percent lift in 2017 revenue.

Peck is now estimating 2016 revenue and EBITDA growth of 45 percent and 65 percent-plus to $3.3 billion and $885 million. Over the longer term, the analyst is projecting a 2019 revenue base of $7 billion-plus and EBITDA of $3 billion.

Bottom line, Peck argued the stock has a "strategic floor value" (of $20 per share) with cost synergies that could enable a buyout of 10x EBITDA at the current market cap. As such, the risk to reward profile "sets up favorably" as a $38 price target represents multiples of 5.5x revenue and 18x EBITDA.

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Posted In: Analyst ColorUpgradesTop StoriesAnalyst RatingsBob PeckFlipboardProject LightningSunTrust Robinson HumphreyTellApartmtwitterTwitter Monetization
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