On Sunday, Deutsche Bank analysts upgraded Twitter from Hold to BUY rating and raised their price target to $56.
Despite a rough start for Twitter early 2020, Twitter has never failed to find a way over the last few years to continue improving monetizable daily active user (mDAU) growth. As a result, the company as has positioned itself for a successful 2021 as they are “well positioned to benefit from an event and a cyclical recovery.” In fact, one thing that analysts continue to be optimistic about is that Twitter can continue its success on a multi-year basis.
Many look to Twitter as their first source of news and entertainment. As more users use the site everyday, the company has a chance to utilize both new and frequent users as a catalyst for higher average revenues per user (ARPU) from “brand spend and new direct response ads."
According to the analysts, there are four major legs that keep Twitter shares growing. First, Twitter has improved products which can lead to user growth even after the pandemic. Second, an event landscape in 2021 will drive mDAU growth, engagement, and advertising in sports and non-sporting events. Third, they "see the potential for revenue growth to inflect as the company increasingly focuses on DR and MAP products, addressing a large portion of the digital ad market (estimated to be upwards of 55% of the $302B global digital ad market in 2019 or $166B). Finally, subscriptions and non subscriptions will create incremental revenue growth and monetize user base.
Brand advertising, the weakest segment of the market, has also improved after it was holding Twitter back during the pandemic.
Furthermore, it is in best interest for Twitter if the professional sports teams are able to play full seasons. Many of these games, as well as the Olympics and world cup are a driver for growth. Many movies will also be released after more people are allowed to attend movie theatres, which is a positive for twitter as many reviews and rumors spread through their website. All of these new releases will build traffic.
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