Tags: twitter | stock | share price | downgrade

Twitter Shares Plunge 13 Percent After Downgrade, Big Rally

By    |   Friday, 27 December 2013 05:08 PM

The shares of social media darling Twitter plunged 13 percent Friday to close at $63.75 after the stock was downgraded by Macquarie Capital analyst Ben Schachter.

Twitter shares remains 145 percent above their November 6 initial public offering level of $26. And they're still 44 percent above the $44.27 average price target of analysts tracked by Bloomberg.

Schachter cut his rating to underperform, which is the equivalent of sell, from neutral. He wrote in a report that Twitter had appreciated more than 40 percent without a change in fundamentals since he initiated coverage Dec. 11.

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"We continue to believe that Twitter as a company has a bright future and many opportunities ahead," Schachter said, according to Bloomberg. "However, as a stock, we believe nothing has changed over the last 15 days to justify the rise in valuation."

His 12-month price target for the stock stands at $46.

Another analyst whose comments may have hurt Twitter Friday is Scott Kessler of S&P Capital IQ. He reiterated his sell recommendation Friday, though he also raised his share-price target to $43 from $30.

"At the end of the day, we have thought and we continue to think the valuation is just initially stretched," Kessler told CNBC. "It's excessive. It appears now that we've approached some kind of mania. When that happens, you just kind of have to wait and see what happens."

As of Thursday, Twitter's market capitalization of $39.9 billion exceeded that of Standard & Poor's 500 Index stalwarts Target ($39.5 billion) and Time Warner Cable ($37.6 billion), according to FactSet. And while the latter two companies posted profits of hundreds of millions of dollars in the third quarter, Target reported a loss.

On Friday, Twitter's market cap fell to $34.7 billion, according to Yahoo.

While Twitter continues to develop its business, Wall Street analysts haven't been won over when it comes to the stock. Of 26 analysts tracked by Thomson Reuters, 19 have the equivalent of a hold or sell rating.

"It appears valuation metrics are irrelevant," Blake Harper, an equity analyst at Wunderlich Securities in Baltimore, wrote in a commentary this week obtained by The Wall Street Journal.

"There's a certain mystique surrounding a company like Twitter, a name recognition that is giving it a boost, or a premium valuation," he told The Journal. "If there's enough people that believe this company is such a great media and tech platform of the future, they're going to buy into it."

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Shares of Twitter fell more than 13 percent Friday as a Macquarie Capital analyst lowered his investment rating on the social media company, citing a major run-up in the stock.
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Friday, 27 December 2013 05:08 PM
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