Twitter named 'top pick' of internet sector by JPMorgan with 23% upside potential on advertising recovery in 2021

• An acceleration in online advertising in 2021 will help drive Twitter stock higher, according to JPMorgan, which named the social media company a "top pick" in the internet sector in 2021.
• In a note on Wednesday, JPMorgan upgraded Twitter to Overweight from Neutral and assigned a $65 price target, representing potential upside of 23% from Tuesday's close.
• "We believe Twitter will show the biggest rebound [in online advertising] given its sharper pandemic-driven ad decline," JPMorgan said.
• Watch Twitter trade live here.

Twitter is poised for a strong rebound in its online advertising business in 2021 as the widespread distribution of a COVID-19 vaccine leads to the reopening of the economy, JPMorgan said in a note on Wednesday.

The bank named Twitter one of its "top picks" in the internet sector for 2021, and upgraded shares to Overweight from Neutral with a $65 price target, representing potential upside of 23% from Tuesday's close.

"We believe Twitter will show the biggest rebound [in online advertising] given its sharper pandemic-driven ad decline," JPMorgan said.

The bank expects a reacceleration in online ad spending among businesses, and thinks Twitter's rebuilding of its ad technology through the Ad Server comes at a good time to benefit off the expected increase in business.

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Twitter's analyst day in February could serve as a positive catalyst for the stock, and activist pressure on management as well as its stock buyback plan could help "support shares," according to JPMorgan.

Potential downside risks that would invalidate JPMorgan's bullish call on Twitter include slower than expected user growth and increased competition from Facebook and Google for mobile advertising spend.

And while Snap and Pinterest trade at a premium to Twitter thanks in part to faster growth, JPMorgan now prefers the relative risk/reward profile in Twitter, which it believes is underowned.

Shares of Twitter jumped as much as 4% in early trades on Wednesday.