This week, the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
Twitter, Inc. (TWTR): Management’s confidence about content monetization, their franchises and partnerships, audience growth trends, and overly pessimistic market expectations spell equity upside potential
Market expectations for TWTR are currently very pessimistic. The market is expecting ROA’ to fade from 10% in 2016 to 6%-7% by 2020, with Asset’ growth slowing from 40%+ a year to 20% a year going forward. However, TWTR has actually seen ROA’ stability for the most part in the past several years, a trend analysts forecast to continue. Also, considering TWTR’s small asset base relative to peers, and several platforms with material growth opportunities, they have substantial opportunity for sustained growth going forward that the market is not pricing in. As such, market expectations appear too pessimistic, spelling potential for equity upside.