Twitter is making 'solid steps down road to recovery' after first-ever profit

pulse

February 12, 2018 4:18 PM

The company is slowly finding its way after years of bad press.

Shares of Twitter exploded more than 21% last week after the company announced its first-ever profit during its earnings release.
Wall Street remains bearish on the stock, but at least one analyst says it's showing signs of recovery.

On Thursday, Twitter reported its first-ever profit in more than four years as a public company.

Shares of the troubled social network exploded on the news, as investors found new confidence in the company's ability to rebrand itself and continue to grow.

"We think a clearer strategy is in place for continued revenue momentum in 2018, stemming from video (live content and DR ad products) and the use of AI in the feed to help grow mainstream adoption," BMO Capital Markets analyst Daniel Salmon said in a note to clients Monday titled “solid steps down road to recovery.”

"If Twitter can keep costs in check, we believe the story could become more interesting as top-line pressures fade, but we also believe the work gets harder from here as low-hanging fruit has been picked and Facebook still looms large."

In order to post its first-ever profit, Twitter cut costs by 28% compared to the same quarter last year, while revenue rose just 2%. The company continues to struggle to add active users.

"I’ve just seen a lot of the benefit of our focus and our disciplined execution over the past year," CEO Jack Dorsey told analysts on a conference call. "We're seeing really healthy signs that are pointing us in the right direction in terms of what we need to continue to do."

BMO has a target price of $28 for shares of Twitter — 12% below where the stock was trading Monday morning — anda “market perform” rating for Twitter.

"Twitter is focused on converting the 2+ million daily active users who haven't visited the platform in the past 30 days into regular users by applying AI to the feed to help in the discovery of relevant content, rather than specific accounts,” BMO said. “We think the addition of the "happening now" module at the top of the timeline will help."

Twitter is down slightly, 0.35% in trading Monday, but still up 21% week-over-week following its earnings beat.

pulse