Twitter Wins Nomura Upgrade As Shares 'Appropriately Reset'

Twitter Inc TWTR is trading down 26 percent since the social media platform's second-quarter print, and it's a correction Nomura has been expecting. 

The Rating

Analyst Mark Kelley upgraded Twitter from Reduce to Neutral and maintained a $31 price target.

The Thesis

Kelley considers investor expectations “appropriately reset” as the risk-reward profile balances out. (See the analyst's track record here.) 

He expects immediate investments in platform clean-up — the consequences of which have been negatively received — to drive user base engagement in the long term. At the same time, ad format and relevancy improvements are seen to boost advertiser retention and growth, and the launch of a self-serve offering could catalyze margin expansion.

The analyst said he suspects the positives are offset by poor monthly active user trends.

“With this in mind, we also believe there is still some downside risk to [the first half of 2019] estimates (though they have come off a bit), and we expect the debate around privacy and platform health investments will lead to a discussion around the long-term margin profile management has outlined,” Kelley said. 

Price Action

Twitter shares were trading up 2.23 percent to $32.08 at the time of publication Tuesday. 

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