Meta's Threads may bring 5% revenue upside as it grows to Twitter size: Evercore
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Meta Platforms' (NASDAQ:META) Twitter-rival text app, Threads, is off to a fast start -- and while it's too early to say for sure, it presents a significant revenue opportunity over the next few years, Evercore ISI says.
The app jumped out to an evening launch last Wednesday and piled up nearly 100M users over its first three days -- a good head start on catching up to Twitter's (TWTR) roughly 240M daily active users.
"Itâs way too early to say how large or profitable Threads can get, but at a high level, we think Twitterâs turbulent execution has opened up an opportunity for a competitor app, and Meta (META) has smartly taken advantage of this and its large 2B+ DAU (Daily Average User) community to jumpstart a new app that we believe poses very little downside for Metaâs current business but creates Revenue & Profit upside optionality for the company," analyst Mark Mahaney said.
Those 100M users come even though Instagram-based Threads won't yet launch in Europe due to data-regulation concerns.
Signing up for Threads (easy for those with Instagram accounts) was smooth and "so far, Threads feels like a cleaner, simpler, friendlier and more authentic version of Twitter, with slightly more intimacy as we are connected to our real-life Instagram friends on Threads," Mahaney said.
What's important, he estimates Threads could near 200M daily active users over the next couple of years --catching up to Twitter (TWTR) with just 10% penetration from Meta's (META) family of apps -- and draw $8B in annual revenue, or 5% upside to Evercore's 2025 estimate.
"Assuming 50% incremental margins, we estimate that $8B in Threads revenue would generate almost $1.50 in incremental EPS or 6-7% accretion to METAâs [estimated 2025] EPS," Mahaney said.
He considers Meta Platforms one of Evercore's top picks and reiterates a $350 price target, implying 20% upside.
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