"We believe that the market has now priced in the expectation that Twitter (TWTR) remains a niche social media product," says Anthony DiClemente, upgrading the stock to a Buy with $43 price target. "Risk/reward is much more favorable now, given the possibility that product enhancements rejuvenate user growth."
DiClemente's five reasons for the upgrade: 1) Markets have priced in the assumption that Twitter is just a niche product; 2) Velocity of monetization per user growth is fastest in the sector by far; 3) International is just scratching the surface; 4) Incremental margins will be higher than the Street is modeling; 5) He's raising his estimates above those of the Street given the above.
DiClemente's target price of $43 implies a 24x P/E ratio after discounting back from his 2017 EPS estimate of $2.19.
Shares +4.2% premarket