Market Overview

Guggenheim Is Bullish On Twitter Due To 'Snackability,' Neutral On Facebook

Share:
Guggenheim Is Bullish On Twitter Due To 'Snackability,' Neutral On Facebook

Investors who think Facebook, Inc. (NASDAQ: FB) and its 1.49 billion daily users is the superior investment idea over the smaller Twitter Inc (NYSE: TWTR) may want to reconsider, at least according to Guggenheim.

Guggenheim's Michael Morris initiated coverage of Twitter with a Buy rating and a $39 price target. The analyst also initiated coverage of Facebook with a Neutral rating and $150 price target.

Twitter Is The Leader

Twitter stands out against its social media peers by offering a communications platform with "snackability," Morris said in a note. Twitter's users appreciate the fact that their "less-personal nature" tweets and comments will be distributed beyond their friends and family list, which makes Twitter a provider of a global real-time discussion platform. Morris said this is mostly preferred by celebrities, politicians, journalists and the global public at large.

At the management level, Morris said Twitter is committed to offering a balanced user experience and environment through supporting free speech and expression to create a "healthy atmosphere" for its user base. This creates a more attractive platform for Twitter's advertising partners and continued improvements should help the company gain market share within the global ad spend market.

Twitter's platform holds an advantage over its peers as it strikes a superior balance between data usage and relevant ad targeting.

The research firms' $39 price target is based on a discounted cash flow valuation model through 2023 using a 10.6 percent weighted average cost of capital and a 3 percent long-term growth rate.

Twitter traded around $31.94 Thursday morning.

Facebook: Health And Security Concerns

Facebook's daily users coupled with its status as a leader in mobile engagement across multiple apps makes it uniquely positioned to offer advertisers superior exposure to key demographic groups that are migrating away from traditional TV, Morris said. The company's advantages, however, are overshadowed by multiple challenges impacting the health and security of its core products.

Among the biggest problems Facebook faces is declining domestic metrics on its core Facebook platform, especially among younger users. While the company's Instagram platform is offsetting some of the headwinds in the core platform, Morris said the declines are still concerning as it impacts monetization initiatives over the long term.

Facebook faces other challenges in terms of how it uses its consumer data, the analyst wrote. The company is still in the early stages of addressing this problem but the concentrated ownership structure (CEO Mark Zuckerberg controls 51.6 percent of the common stock voting rights) adds another layer of risk as it calls into question management's ability to address its risks.

Guggenheim's $150 price target is based on a discounted cash flow valuation through 2023 using a 10.7 percent weighted average cost of capital and a 2 percent long-term growth rate.

Facebook traded around $136.22 per share Thursday morning.

Related Links:

Munster: There's Something 'Fundamentally Wrong' With Facebook

Twitter Bear Vs. Bull Debate: A Rally Ahead Or 'A Lot Of Room To Drop'?

Latest Ratings for FB

DateFirmActionFromTo
Jun 2019MaintainsBuy
Jun 2019UpgradesNeutralBuy
May 2019Initiates Coverage OnBuy

View More Analyst Ratings for FB
View the Latest Analyst Ratings

Posted-In: advertising Guggenheim InstagramAnalyst Color Price Target Initiation Top Stories Analyst Ratings Best of Benzinga

 

Related Articles (FB + TWTR)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
MANMaintains96.0
INTCMaintains57.0
CHNGInitiates Coverage On19.0
BRMaintains150.0
SLBMaintains41.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Aphria's Sell-Off Is Burning Cannabis Stocks

The Rise Of A Quiet Thematic ETF