Twitter Inc (NYSE:TWTR) is turning more and more bulls into bears, and it’s really weighing on the stock. Today we’ve got another analyst downgrade, this time from Cantor Fitzgerald. It looks like it’ll close below $60 a share today in these last few minutes of the regular trading day. One expert on Elliott Waves predicted that Twitter shares will slump down to $55, and it’s beginning to look like he could be right.
Twitter’s valuation became “excessive”
The analysts said they found Twitter Inc (NYSE:TWTR)’s valuation to have become “excessive” in light of the extreme excitement on Wall Street. As a result, they downgraded Twitter stock to Sell. That goes against their usual practice of reserving Sell ratings only for companies they believe have “business models with structural challenges.” However, they see more downside than upside in Twitter’s future over the next year because of the high valuation.
Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More
They maintained their price target of $32 per share on Twitter and noted what they called a “major discrepancy” in analyst estimates. They said “banking” and “non-banking” analysts have set their estimates quite differently. For example, they said analysts who played a role in Twitter Inc (NYSE:TWTR)’s initial public offering have estimates which tend to be lower than those which didn’t play a role in it.
Another area of concern they mention is that Twitter shares could be pressured by the expiration of the first lock-up, which is about a month away.
Not all analysts are downgrading Twitter
Earlier this week, Morgan Stanley analysts also downgraded Twitter, pushing it down to Underweight because they see greater risk because of the competition the company faces for revenue from advertising.
Interestingly enough, the Cantor Fitzgerald report comes at the same time as a report from analysts at Susquehanna Financial Group, who called Twitter Inc (NYSE:TWTR) one of their top picks for 2014. Although even they admitted that the valuation looked stretched, they refrained from putting a Negative rating on Twitter because of the high level of uncertainty which surrounds Twitter right now.
They increased their price target from $38 per share to $55 per share and kept their Neutral rating on the stock.