Twitter CEO Jack Dorsey addresses students during a town hall at the Indian Institute of Technology (IIT) in New Delhi, India, November 12, 2018.

Twitter shares rose Thursday after Bank of America Merrill Lynch upgraded the stock, citing increased usage by younger people and more engagement by its current users.

Bank of America raised the stock to buy from neutral and took the firm's price target to $39 from $31. The stock opened Thursday's trading 2 percent higher, to $32.93.

"Churn remains elevated, but improving metrics in the 18-29 demographic suggest more younger users are turning to Twitter," the firm said Thursday in a note to clients, citing a social media user survey. "Nine percent of users indicated they planned to user Twitter more next year, up from 6 percent in our 2Q survey."

Twitter closed Wednesday at $32.25, up more than 30 percent over the last 12 months. Facebook is down more than 20 percent over that same period.

"While Twitter has significantly less time spent per user than Facebook, monetization is also significantly lower than the $25 ARPU Facebook will generate globally in 2018, and $108 in the U.S.," the note said. "If Twitter can continue to improve engagement and targeting and build out its direct response advertiser base, comps suggest opportunities for significant ARPU increases." (ARPU is average revenue per user.)

Along with the strong user data, the firm also believes Twitter will be a "strong play" as more advertising dollars go to video ads online.

— With reporting by CNBC's Michael Bloom