Why Is Twitter (TWTR) Stock Gaining Today?

Shares of Twitter (TWTR ) gained more than 6.5% in early morning hours Tuesday after a major Wall Street analyst upgraded the stock and called for stronger advertising revenue growth this year.

Led by analyst Brian Nowak, Morgan Stanley raised its rating for Twitter shares to equal weight from underweight. The firm also raised its price target for the stock to $29 from $28, representing a slight 1.5% upside to Monday’s close.

“Constructive advertiser conversations, improving user growth, and positive revisions make a more compelling risk/reward,” Nowak wrote in a note to clients. “Recent advertiser conversations continue to be incrementally positive about Twitter’s ad business.”

Nowak mentioned that Twitter recently revamped its ad tools to improve targeted advertising and lowered its prices for ads, spurring higher demand. The analyst also pointed to new content initiatives as a reason to be optimistic.

“We believe Twitter’s video ad product continues to perform well as advertisers continue to look for higher quality online video impressions,” he added.

Nowak and Morgan Stanley’s renewed bullishness is just one part of a larger trend of improving analyst sentiment for Twitter. Within the past 60 days, the company’s full-year earnings estimates have trended higher, lifting the overall Zacks Consensus Estimate by three cents.

Analysts now expect Twitter to witness EPS growth of 36% in the current fiscal year. And based on our consensus estimate for revenue, this earnings growth is projected to come on the back of nearly 10% sales growth. Looking further ahead, early estimates are calling for Twitter to see additional EPS growth of 20% and revenue growth of 11% in 2019.

Twitter is finally starting to generate the top- and bottom-line growth needed to inspire investor confidence. Meanwhile, positive earnings estimate revision activity has lifted the stock to a Zacks Rank #1 (Strong Buy), and expansion projections have helped it earn an “A” grade for Growth in our Style Scores system.

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