Twitter’s stock is up 4% this morning, going as high as $US58.19.
That’s blowing past even the most bullish price targets on the street.
Until this morning, the highest price target on the stock was $US54. The consensus is $41.45.
A week ago the stock was trading at $US45.
So what’s caused the ~26% jump in the stock?
We asked Robert Peck, analyst at SunTrust. He was the first mega bull on Twitter. He slapped a $US50 price target on the stock before the IPO.
He gave us four reasons the stock is up (and we think these are basically in order of importance):
1. Twitter is increasing its targeting on the platform, reaching Facebook levels of targeting accuracy. Twitter had a blog post explaining that it is going to be able to track usage from the web to the Twitter app and serve ads.
2. Twitter’s ad exchange MoPub is going to sell ads outside of Twitter. This is a big expansion, and a big opportunity to generate revenue from more than just Twitter, which remains a relatively small service.
Before we move on to reasons 3 and 4, we should note that these previous two bits of news were made possible when the quiet period was lifted. Once Twitter was free to talk about its business publicly, it was able to provide clarity to investors.
3. RBC analyst Mark Mahaney jacked his price target to $US60 this morning, the highest on the street. He was at $US33 before, so this is a serious increase, and it’s driving the stock today. In his note, Mahaney said, “We are increasing our estimates based on the positive results of our advertiser survey, our industry checks, and our increased conviction in Twitter’s advertiser tools and user functionality improvement potential.”
4. There isn’t a lot of Twitter stock out there to buy. Peck says Twitter didn’t release a lot of stock in the first place, so there’s a supply and demand issue. He says that a few shareholders have big chunks of the stock, but they’re not selling, making it harder for people that want to buy.
Overall, people are seeing that Twitter’s core business has potential. They are hearing from marketers and ad agencies that Twitter is a good platform for advertising. And this is driving the stock.