Twitter Inc (NYSE:TWTR) fell 16.5 percent over the last month, but one firm thinks the stock is right where it should be.

The Rating

Morgan Stanley analysts Brian Nowak and Jonathan Lanterman upgraded Twitter to Equal-Weight and increased their price target from $28 to $29.

The Thesis

Based on advertiser conversations, Morgan Stanley expects respective 14-percent and 13-percent related revenue growth in 2018 and 2019 as Twitter entices with video media, investment in advertiser educational tools and reduction in ad unit pricing.

At the same time, the analysts forecast monthly active user (MAU) growth driven by the World Cup and U.S. midterm elections. Platform improvements in content media and relevancy-ranked order are seen to enhance personalization and increase user retention.

“Valuation continues to be expensive (not new for TWTR), but we think investors are likely to continue to pay a premium for TWTR given expected revenue acceleration in '18; positive revisions pointing to continued turnaround progress; platform scarcity,” Nowak and Lanterman wrote in a Tuesday note.

They raised 2018 and 2019 estimates for earnings before interest, taxes, depreciation and amortization 6 percent and 9 percent, respectively.

Price Action

Shares traded up 2.3 percent premarket at a rate of $29.24.

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