Twitter: Buy the Dip, Says JPMorgan

JPMorgan Chase & Co. has urged its clients to buy Twitter Inc. (TWTR) stock, arguing that a report from the The Washington Post claiming that the company suspended millions of accounts was misinterpreted by investors.

In a research note, reported on by Barron’s and Seeking Alpha, Doug Anmuth said The Post’s article sowed “confusion” by insinuating that the removal of 70 million fake accounts would impact Twitter’s closely watched monthly active user (MAU) numbers, due to be reported later this month.

The analyst believes that a significant number of these suspended accounts were dormant for more than 30 days and, therefore, won’t end up being calculated as part of Twitter’s MAU tally. “We’d be taking advantage of the weakness,” Anmuth said in reference to the sell-off that followed The Post’s report — Twitter’s shares fell as much as 10% following the publication of the article. (See also: Twitter Breaks Down as Suspensions Cap Growth Rates.)

In the note, Anmuth reiterated an overweight rating on Twitter’s stock and a $50 price target, implying 13% upside from Monday’s close.

“TWTR confirmed 70M accounts were suspended in May and June, but this number does not directly tie to TWTR’s reported MAUs, which were 336M at the end of 1Q18,” he wrote. “TWTR has many more overall accounts than 336M, and we believe a significant portion of the suspended accounts were dormant for more than 30 days and therefore not MAUs. Accounts could also be suspended the same day they were created, and also fall outside of MAU calculations.”

Besides dismissing concern about damage caused by removing “spammy and suspicious accounts,” Anmuth applauded Twitter for improving the quality of its platform, claiming that these long-standing efforts are “critical for the health of the service.” Rather than focus on the negatives, he claimed that investors should be encouraged that Twitter now has the technology in place to easily detect when to immediately suspend accounts.

Anmuth’s comments in defense of the social media giant mirror what Twitter CFO Ned Segal said shortly after the article from The Post was published. In a series of tweets, Segal claimed that most accounts that Twitter removed are not included in its in reported MAU figure.

“Some clarifications: most accounts we remove are not included in our reported metrics as they have not been active on the platform for 30 days or more, or we catch them at sign up and they are never counted,” wrote Segal. “If we removed 70M accounts from our reported metrics, you would hear directly from us. This article reflects us getting better at improving the health of the service.” (See also: How Twitter and Square Burned Short Sellers.)

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