Twitter could rise another 30% as ad spending is set to soar, Bank of America says

• Twitter stock could rise by almost 30% to $90 per share, according to Bank of America analysts.
• BofA sees Twitter expanding in its advertising growth which took a hit during the COVID-19 pandemic.
• BofA reiterated its buy rating on the stock.

Twitter stock could rise by about 30% as the social media platform stands to see further growth in advertising sales which have been recovering after the onset of the coronavirus pandemic, Bank of America said Friday.

Twitter's own outlook for the third quarter points to optimism about its business prospects, the investment bank said in a research note in which it raised its price objective and reiterated its buy rating on the stock.

The bank's new price objective of $90 follows Thursday's closing price of $69.57, implying a 29% increase. BofA increased its price objective from $82 after Twitter late Thursday posted a 74% jump in second-quarter revenue, to $1.19 billion. That beat expectations of $1.07 billion in a Refinitiv poll of analysts. It also marked the fastest rate of top-line growth since 2014.

Shares of Twitter were up 4.2% on Friday after rising as much as 5.4% to $73.34 during the session.

Twitter's outlook "suggests more optimism," for the third quarter and revenue looks quite strong, BofA analyst Justin Post said in the note. Twitter projected revenue of $1.22 billion to $1.3 billion, higher than the $1.07 billion expected in a FactSet poll of analysts.

The social media site posted an 87% spike in advertising revenue year over year to $1.05 billion, citing a broad increase in demand and improvements in its brand and direct response ad products.

"We reiterate our positive view on Twitter for 2H based on increased brand advertising rebound," and, among other things, continued traction in its offerings for Mobile Application Promotion, said BofA. MAP is a technology that aids advertisers in promoting their mobile apps. Twitter said Thursday it had launched its playable ad pilot that's designed to help mobile gaming advertisers gain new customers by allowing them to experience gameplay before installing an app.

"[We] are optimistic that the MAP product ramp can drive solid 23% q/q 4Q growth, better than Twitter's historical pre-pandemic average," said the analyst.

Twitter's advertising dropped 23% to $562 million in the second quarter of 2020 on a year-over-year basis as the COVID-19 pandemic drove down global demand in the face of widespread economic recession.

"While user growth will remain a question, we maintain our optimistic view that Twitter can increase its still (very) limited reach as a differentiated news and content platform, with strong distribution on other media," said BofA's Post.