Twitter (TWTR) Improving Google Integration Offers MAU Upside, Canaccord Genuity Says

Canaccord Genuity analyst Michael Graham reiterated a Buy rating on Twitter, Inc. (NYSE: TWTR) but lowered his price target to $40.00 (from $45.00). The analyst is positive on the continued Twitter/Google search integration and said it offers upside to users growth.

Graham commented, "TWTR stock is down 22% YTD vs. the S&P 500 being down 5%. This is mostly the result of an 18% move down the day after Q2 earnings when MAUs missed estimates and management reset expectations to not anticipate a re-acceleration for some time. Even though the advertising story remains solid, with a Q2 revenue beat and U.S. ad ARPU reacceleration, growing the user base remains an important issue. Management believes it has reached early adopters and technology enthusiasts, but has not cracked the mass market yet. This will require more product innovation (and simplification) followed by a marketing campaign that focuses on how to use the service and why. One way to reinvigorate MAU growth is to expand the number of visitors to the Twitter properties, relying on strong conversion to turn visitors into MAUs. One way of doing this that we believe has big potential is the integration with Google that surfaces real-time Tweets in search results. The partnership was launched in May and has since been improved"

The analyst highlighted the following:

• Update expands integration to desktop and international – In August, after launching initially in May, Google announced that real-time Tweets would be included in desktop search results as well as mobile. Additionally, English speaking international regions would also have the Tweets show up in mobile and desktop Google results.
• Mobile search penetration has improved to >90% – After being available for roughly four months, the percent of mobile search queries in the U.S. that surface Tweets improved from 54% to 91%. The average rank in the results page and the average number of Tweets per search didn't change but now almost every search across every category will display a Tweet.
• Desktop is beginning on equally strong footing – Although desktop only became a part of the partnership about a week ago, its penetration is ramping faster than mobile. Desktop search queries in the U.S. already display Tweets 94% of the time. And though desktop Google results have lower click-through rates than mobile, Tweets are showing up higher.
• Logged-out user impact improving, but could be bigger - Assuming visitors to Twitter from these Google results don't overlap with MAUs, the integration could have an 8M logged-out user impact. The biggest impact comes from the sheer number of search queries that now show Tweets. With a broad international roll-out this could go even higher.

For an analyst ratings summary and ratings history on Twitter, Inc. click here. For more ratings news on Twitter, Inc. click here.

Shares of Twitter, Inc. closed at $28.30 yesterday.

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