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New JP Morgan Report Projects Strong Outlook for Twitter

New JP Morgan Report Projects Strong Outlook for Twitter

By | 10.13.14
New JP Morgan Report Projects Strong Outlook for Twitter

According to a new report released by JP Morgan analyst Doug Anmuth, Twitter’s future outlook is strong. This year alone, Twitter’s revenue more than doubled in the second quarter to $312 million, and that upward trajectory is expected to continue, with Twitter realizing greater margin expansion based on two factors: the nature of the platform (mobile friendly with user generated content) and the broader rollout of self-serve advertising.

Based on this report, JP Morgan has increased its estimate of net user add-ons for Twitter to 17 million in the third quarter and Twitter is forecast to have 600 million users across the world by 2018. In addition, analyst Anmuth raised his rating of Twitter shares from “neutral” to “overweight.”

Much of this newfound confidence has been based on Twitter’s recent ability to accelerate user growth (the company has taken steps recently to speed up the “onboarding” of new users, using such strategies such as accessing a user’s contacts to increase follows, providing more relevant suggestions and guidance for user follows, and a simplification of the Twitter sign-up process). In addition, Anmuth sees promise in trial experiments that have explored new ways to segment Twitter content, either by topic categories or by more general themes such as work, personal, and sport. This would be a shift away from the traditional reverse chronology structure and would potentially make Twitter more accessible to a wider range of users.

The current mobile platform wave is also a strong indicator of future Twitter success, particularly given the mobile friendly nature of Twitter’s short messaging platform. This is based on the simple fact that more than 75 percent of current Twitter users come from mobile, as does that same percentage of its ad revenue. The JP Morgan report projects that Twitter will continue to benefit from the trending consumer shift from desktop platforms to mobile devices.

Twitter’s natural alignment with mobile is also expected to be an advantage in expanding its ad business outside the U.S. and entering international markets (currently U.S. customers represent around two-thirds of its ad revenue). The JP Morgan report projects that this advantage will help Twitter to close the gap in ad revenue between the U.S. and international markets (dropping from a ratio of 5 times greater to 3.7 times greater).

 

References

Essany, Michael. “JP Morgan Analyst: Mobile Will Propel Twitter Growth“. Mobile Marketing Watch. 10/8/14. (10/9/14).

Walsh, Mark. “Analyst Expects Changes, Mobile to Fuel Twitter Ad Growth“. Social Medial & Marketing Daily. 10/2/14. (10/9/14).

 

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