Twitter a Top Pick Ahead of Friday Earnings: JPM

Shares of Silicon Valley  social media company Twitter Inc. (TWTR) are trading up nearly 5% on Wednesday ahead of earnings slated for Friday before market open. The tech stock, already up about 84% year-to-date (YTD) compared to the S&P 500’s 5.8% return, is set to rally on second-quarter results, according to one team of bulls on the Street. (See also: Citron Shorts Twitter on Data Privacy Concerns.)

On Wednesday, analysts at J.P. Morgan wrote a note to clients reiterating an overweight rating on the San Francisco-based company’s stock and forecasting the firm to beat consensus estimates in Q2. 

“We believe Twitter’s platform continues to strengthen, led by product improvements such as increasing video content, bookmarks, and information quality efforts, along with more compelling returns to advertisers,” wrote J.P. Morgan’s Doug Anmuth. He added that Twitter, led by founder Jack Dorsey, also the CEO of Square Inc. (SQ), is one of the investment bank’s “top ideas” alongside tech titans Facebook Inc. (FB) and Amazon.com Inc. (AMZN), “all of which are on the J.P. Morgan US Equity Analyst Focus List.” 

Account Clean-Up Lauded​​​​​​

Bears have voiced concerns over the effect of Twitter’s purge of fake accounts. Last week, news surfaced that the company removed 70 million accounts in May and June alone, leading investors to fear a decline in Twitter’s active user count. In response, Twitter Chief Financial Officer Ned Segal issued a statement that most accounts removed are not indicated in reported metrics. He added, “if we removed 70M accounts from our reported metrics, you would hear directly from us. This article reflects us getting better at improving the health of the service.”

J.P. Morgan downplayed concerns over Twitter’s account removals, indicating that “user account clean-up is positive long-term,” as it is beneficial to the overall health of the platform and should not have a significant impact on reported monthly active users in the near term. Anmuth expects second-quarter sales to come in at $714 million, beating the Street’s forecast for $698 million. (See also: 8 High-Profit Tech Picks From Goldman Sachs.)

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