The Street’s View On Twitter

A banner with the logo of Twitter is set on the front of the New York Stock Exchange on November 7, 2013 in New York

Shares of Twitter perked up on Wednesday after JP Morgan [$JPM] analyst Doug Anmuth upgraded the stock to a Buy rating. Twitter [$TWTR] stock closed up 2.3% to $54.03 in the regular session. Shares have gained 69% this year, as the S&P 500 index rose 14%. The FTC Wants Zuck to Get Rid of IG & WhatsApp

Dubbing Mr. Dorsey’s social media company, Twittah, one of the bank’s top picks and under-owned, Anmuth mentioned in a client note Wednesday that his team forecasts some internet companies will be able to post continued growth at reasonable valuations. Make no mistake, Twitter is one of those companies, and as a result, worth a premium to advertising competitors. Anmuth bumped his target price to $65 from $52 on top of the Buy rating.

Wall Street has long been dubious of Twitter stock, and Anmuth’s report stems from the bulk of analysts polled by FactSet. Of the 38 analysts that cover the company, only 11 have slapped a Buy rating, 22 gave it a Hold, and 6 rated it a Sell. The average target price is $46.24, which implies a downside of about 14%. J.P. Morgan’s target price implies an upside of roughly 20%.

“When you build something like a Twitter or Square, the greatest value is actually seeing someone else use it. That’s what drives us. It feels electric,” Dorsey said. “The first time we saw tweets from Iran, it felt electric. It felt amazing.”

Anmuth noted his team values Twitter above competitors because of its unique product that serves as a compliment to other kinds of media, such as TV. Anmuth also claims that the company is in a prime spot to take advantage of more advertising dollars moving to mobile and video, as the company’s ad products improve.

Anmuth wrote that Twitter is in a great position to benefit from the rebound in online advertising from the lows earlier this year, when advertisers tapped the breaks on spending. Shares trade at a bargain to Snap [$SNAP] and Pinterest [$PINS], Anmuth says. Twitter is hosting an analyst day February 25, which could prove to be a positive spark for the stock. 

Twitter has to improve its direct-response advertising efforts and performance-based ads, Anmuth wrote. Despite liking the company, Anmuth acknowledged that competition from Facebook [$FB] and Alphabet [GOOG] is fierce. Anmuth’s team includes Facebook and Alphabet shares as top picks among tech companies. The bank also likes Lyft [$LYFT] stock as a potential play on the economic recovery associated with a widely distributed coronavirus vaccine.