Oppenheimer Launches Coverage Of Twitter At Perform Rated, Cites Fully Valued Profile

Jason Helfstein of Oppenheimer initiated coverage of

on Friday with a Perform rating and $36 price target. “While Twitter is the best Internet platform for real-time content discovery, we believe the stock's current valuation of 10x 2015 estimated sales, a 52 percent premium to peers, fully reflects future prospects based on current growth rates,” Helfstein wrote. According to Helfstein, Twitter's user base use the platform to follow content from users they don't personally know (such as athletes, media outlets and entertainers) and not for general media consumption. As such, the analyst notes that Twitter ranks 11th among media consumption sites (as users tend to go directly to other sites or apps for media consumption) which puts the company “in a difficult position of trying to change user behavior.” Helfstein estimates that Twitter will see a 31 percent revenue growth through 2020 based on ad loads increasing from 1.3 percent to 5.0 percent. As such, the company's adjusted EBITDA margins will improve to 44 percent in 2020 from 19 percent in 2014. However, the analyst notes that a neutral rating is justified for the time being as he would need to see monthly average users accelerate to become positive on the stock or the company can monetize its 500 million “logged-off” users.