Twitter analyst support piles up as turnaround gains steam

As Twitter came clean about its role in spreading Russian propaganda during the 2016 election, it accumulated likes from some of its most important followers: Wall Street analysts.

The San Francisco company, in the third year of CEO Jack Dorsey’s turnaround effort, has been upgraded by at least six analysts since reporting better-than-expected third-quarter results in October. That’s helped fuel a more than 40 percent rally.

On Friday, Twitter reported it had concluded an investigation into Russian interference in the U.S. election on its service. It had previously identified and suspended accounts connected to a Russian propaganda operation known as the Internet research agency. Twitter said it would email notifications to 677,775 people in the United States who had followed one of the accounts or retweeted or liked a tweet posted by them.

The controversy has not seemed to dim Twitter’s popularity as a news source. Facebook’s recent decision to emphasize content generated by users’ friends and family in their news feeds, pulling back from posts created by brands, businesses and news outlets, was cited by Victor Anthony, an analyst at Aegis Capital, when he raised his rating on Twitter’s stock Monday to buy from sell. Anthony said Facebook’s shift will probably boost Twitter’s importance to media outlets and businesses.

Daniel Ives, chief strategy officer at GBH Insights LLC, agrees that Twitter has a unique chance to win more business from advertisers and publishers.

“Facebook is still the behemoth, but publishers have to hedge their bets and have to at least start to tiptoe back into the Twitter platform,” Ives said.

Twitter has long been favored by journalists, entertainers, athletes and politicians as a place to comment. A key part of Dorsey’s strategy has been to try to make Twitter a destination for a wider audience to see “what’s happening now,” by entering into video streaming partnerships with news outlets and sports leagues.

But it hasn’t been able to topple Facebook, where about 45 percent of Americans get their news, versus 11 percent for Twitter, according to a Pew Research Survey conducted in August.

Last week, BTIG analyst Richard Greenfield raised his target for shares to $30 from $25, saying that users are returning more frequently and spending more time on the platform on a daily basis. The trend is partly a result of Twitter’s improved algorithm that shows users the most relevant tweets first, he said. Shyam Patil, an analyst at Susquehanna Financial Group, recently said improvements in Twitter’s live video advertising could make the company a “surprise performer in 2018.”

Still, not all analysts are convinced.

“Things are moving in their favor, but fundamentally the company is no different from about a year ago when the stock was around $17,” said James Cakmak, an analyst at Monness Crespi Hardt & Co. He has the equivalent of a hold rating on Twitter.

Vertical Group initiated coverage of Twitter with the equivalent of a sell rating, saying there is “no ad growth turnaround in sight.”

San Francisco Chronicle staff contributed to this report.