Election Season Should Boost Twitter, But Wedbush Remains Neutral

Wedbush’s Michael Pachter attributes the recent appreciation in Twitter Inc TWTR shares to speculations that the company might be acquired, although there is no clear-cut potential buyer.

Pachter maintains a Neutral rating on the company, with a price target of $20.

The analyst explicated, “Management appears complacent about the status quo and unfocused on the lack of user growth. Until Twitter is focused on attracting new users, driving increased use by its existing users, and demonstrating its value proposition to people who don’t use the service, we expect it to grow very slowly.”

2Q Upside Driven By Politics

Twitter is scheduled to report its 2Q16 results on July 26, and Pachter expects upside, driven by cost control, seasonality and political ad spending.

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The analyst expects Twitter to report its revenue marginally above consensus and at the high end of the guidance, with the adjusted EBITDA and EPS in line with the consensus forecasts and guidance.

“We believe that a seasonal lift in ad spending and fierce competition for the two Presidential nomination campaigns likely drove revenue above the high-end of guidance,” Pachter elaborated, while expecting the revenue upside to overshadow the limited user growth.

Even if Twitter does report quarter-on-quarter growth in the U.S. MAU, it is likely to have been driven primarily by politics.

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