First Downgrade Comes For Twitter Inc. (NYSE:TWTR)

Posted by Lynn Eisler November 10, 2013 0 Comment 1418 views


The launch day gains for Twitter Inc. (NYSE:TWTR) sent strong signal for other companies valued at more than $1 billion. The launch day closing of $44.90 against its issue price of $26 signified that Twitter’s growing losses did not pose any hurdle as it raised over $2.1 billion in its IPO. Now many privately held companies are accelerating their IPO plans and include file-sharing company – Box valued at more than $1.2 billion; the payments company – Square which is expected to breakeven by 2015; and an accommodation service provider – Airbnb which is expected to be profitable.

When the privately held companies are exploring and accelerating their IPO plans, investors need to exercise caution with their investments in speculative Twitter Inc. (NYSE:TWTR)’s stock that lose about 7.25% in the session following the launch day.

The stock analyst with Pivotal Research, Brian Wieser has already signaled red with the ‘sell’ rating for Twitter’s stock with price objective of $30 a share. This suggests a potential downside of approximately 28% from its Friday’s closing of $41.65. Based on Twitter’s growth prospects, catalysts and reduced cash flow valuation, the analyst rates the stock expensive when trading into high 30s or beyond. The analyst remarks the fair stock valuation around high 20s or low 30s.

As Twitter and Facebook Inc. (NASDAQ:FB) clinch majority of their profits from the digital advertising industry, analysts favor Facebook over Twitter, as of now. During past three months many equities research analysts have rate Facebook with ‘buy’ rating. Among these, include CRT Capital and Canaccord Genuity that initiated ‘Buy’ for the stock in September; BTIG Research upgraded its rating from ‘neutral’ to ‘buy’ on October 30, 2013; and Argus upgraded its rating from ‘hold’ to ‘buy’ on Nov. 1st.

Out of 40 equities research analysts following the stock, 13 analysts maintains ‘strong buy’ and 19 analysts rates ‘buy’ for Facebook. The mean price target for the stock is $58.48 that suggests potential upside of 23% from its previous closing of $47.53.



About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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