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Twitter Price Target Raised by J.P. Morgan on Earnings Outlook

'We expect meaningful improvement from Twitter's negative 15% Y/Y ad revenue decline in the last 3 weeks of June,' the bank said.
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Twitter  (TWTR)  shares rose Tuesday after J.P. Morgan analyst Doug Anmuth raised his share-price target to $52 from $39 on a positive outlook for the social media titan’s third-quarter earnings.

Anmuth kept his neutral rating. Twitter recently traded at $49.40, up 1.84%, and has jumped 56% year to date.

Going into Thursday’s earnings report, “we expect meaningful improvement from TWTR’s negative 15% Y/Y ad revenue decline in the last 3 weeks of June,” Anmuth wrote in a commentary.

“While TWTR likely still lags peers during the ad market recovery, we are confident that brand marketers have resumed spending, specifically as sports have returned and the economy has re-opened.”

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In addition, “the company completed its ad server rebuild and continues to iterate MAP 2.0, each of which should make the platform more nimble and improve optimization for marketers,” Anmuth said.

“In that context, we raise 3Q ad revenue to $703M (flat year-on-year) vs. $623M (11% year-on-year decline) previously, suggesting the platform returned to revenue growth in the latter half of the quarter.”

Also, “we believe mDAUs [monetizable daily active usages] should benefit from the heavy news cycle into the U.S. election, as well as product updates. We raise our 3Q mDAU estimate by 3M to 194M (up 34% Y/Y).”

Morningstar analyst Ali Mogharabi offered mixed comments about Twitter last week and puts fair value at $34. “While Twitter user growth has accelerated since late 2018, a potential slowdown remains a concern,” he wrote.

“In addition, slower user growth could make higher monetization of users an increasingly difficult task, as advertisers may allocate a bit more toward other platforms such as Snap, which has a faster-growing user base.”