By Emily Bary
The online advertising market is set to accelerate in 2021, and Twitter Inc. could be the biggest beneficiary.
That’s the view of J.P. Morgan analyst Doug Anmuth, who upgraded Twitter’s stock /zigman2/quotes/203180645/composite TWTR -5.18% to overweight from neutral Wednesday. “We believe Twitter will show the biggest rebound given its sharper pandemic-driven ad decline,” he wrote, also citing the potential for benefitting from recent ad-tech improvements and increases in advertiser count and ad load.
Anmuth named Twitter one of his top picks for 2021, noting that the stock trades at a “substantial discount” to shares of faster-growing Snap Inc. /zigman2/quotes/205087158/composite SNAP -7.91% and Pinterest Inc., /zigman2/quotes/211319641/composite PINS -8.29% but he likes Twitter’s “risk/reward” balance better. An upcoming Twitter analyst day in February could serve as a momentum driver for the stock, he argued, as could “ongoing activist pressure” and Twitter’s plan to buy back shares.
He raised his price target on the stock to $65 from $52. Twitter shares are up 4.9% in Wednesday morning trading.
Anmuth’s other top picks in the internet universe include “continued secular winner” Peloton Interactive Inc. /zigman2/quotes/208035743/composite PTON -3.60% , vaccine-recovery play Lyft Inc. /zigman2/quotes/208999293/composite LYFT +0.30% , and both Facebook Inc. /zigman2/quotes/205064656/composite FB -3.39% and Alphabet Inc. /zigman2/quotes/205453964/composite GOOG -4.00% /zigman2/quotes/202490156/composite GOOGL -4.27% , which he said offer growth at a reasonable price.
“Looking forward, we expect to see some rotation away from at-home winners and toward reopening beneficiaries on vaccine distribution, with our bias in 2021 shifting more toward internet companies that we believe are well positioned to deliver strong sustainable growth at reasonable valuation,” he wrote. “We still expect strong secular growth on higher digital penetration levels in 2021— especially in online advertising — but we recognize growth sustainability will be tougher for some companies that are lapping difficult comps.”
Twitter shares have gained 72% so far this year as the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.54% has risen 14%.