Twitter (TWTR) - Get Report shares were upgraded to buy from neutral at Goldman Sachs, where analysts led by Heath Terry said the social-media message service should be able to monetize its user growth, which began rising even before the coronavirus pandemic.
The upgrade may seem odd, given Twitter’s drop in fourth-quarter operating profit and its muted outlook for this quarter, issued in early February even before the coronavirus epidemic hit hard in the U.S.
Further, while social-media sites have enjoyed booming user traffic during the pandemic, analysts say advertising has dropped off, as companies have slashed spending.
But the Goldman analysts are unbowed.
"[As] new and returning users see the value of the platform, many will stay as we've previously seen in more localized crises, creating future inventory that Twitter will be able to better monetize as the company invests in its ad technology through the crisis," they wrote in a report.
The analysts say worries about the pandemic’s effect on Twitter are overblown.
A number of variables go into "estimating the impact of the current crisis (user growth, advertiser exposure, ad budget trajectories, etc.)," they said.
But "acceleration in Twitter users implied by company guidance and third-party data, along with the pre-crisis acceleration in user growth and engagement driven by product investments, leave Twitter well positioned to exit this crisis stronger than it entered it," they said.
The analysts lowered their share-price target to $35 to $39 to account for the stock’s recent drop.
Twitter shares at last check stood at $24.11, up 4.7%.
The stock has dropped 29% in the past three months, matching the S&P 500 index.