JP Morgan says buy Twitter because it is getting unfairly punished for Facebook's data issues

  • "Twitter remains our favorite smid-cap in the Internet space and our $36 price target represents 28 percent upside," stated JP Morgan.
  • Twitter shares are down 12 percent this month, not that far behind Facebook's 15 percent drop.
  • "We believe the pullback in Twitter shares on Data Licensing concerns is overdone," said the investment bank.
A worker unveils a floor mat bearing the logo of Twitter and the symbol on which Twitter's stock will traded (TWTR) on the floor of the New York Stock Exchange (NYSE) on November 7, 2013 in New York City.
Andrew Burton | Getty Images News | Getty Images
A worker unveils a floor mat bearing the logo of Twitter and the symbol on which Twitter's stock will traded (TWTR) on the floor of the New York Stock Exchange (NYSE) on November 7, 2013 in New York City.

Twitter does not have the same data and privacy issues as Facebook and so the drop in the stock this month is not justified, JP Morgan says.

The shares are down 12 percent in March, not that far behind Facebook's 15 percent drop, as the leading social media giant deals with an unfolding scandal tied to political research firm Cambridge Analytica gaining access to the personal data of more than 50 million users.

Twitter took a hit on Tuesday after short-seller Andrew Left said he is now betting against the shares and charged the company is vulnerable to regulation similarly as Facebook because of its data selling business.

"We recognize that broader industry headlines around use of data and potential regulation may be around for some time, but we believe the pullback in Twitter shares on Data Licensing concerns is overdone and we would take advantage of recent weakness," JP Morgan's Doug Anmuth wrote in a note to clients Wednesday. "Twitter remains our favorite [small- and mid-cap] in the Internet space and our $36 price target represents 28 percent upside."

Twitter tried to stem the controversy by commenting on the Left report that it does not sell access to direct messages to users and so most of the data it sells is public anyway.

JP Morgan highlighted that response by the company in its bullish note this morning.

Anmuth believes this will be a big year for Twitter and the start of bigger things to come.

"We continue to believe the user value proposition of TWTR's platform — focused on real-time news, information, and discussion — is becoming more differentiated and compelling," the note stated. "TWTR's execution is improving across both products and advertising, which we expect to drive 11 percent DAU growth in 2018 and accelerating revenue growth of 14 percent."

Twitter shares are still up more than 16 percent this year.