Twitter Inc (NYSE:TWTR) is one of the hottest stocks in the technology sector. And it’s highly volatile. Over the last month, we have seen Twitter Inc (NYSE:TWTR) soaring near $75 to tumbling below $58. Sarah Frier of Bloomberg says that swings in the microblogging company’s stock are driven by extremely contrasting analysts ratings. For example, Evercore Partners analyst Ken Sena is bullish on the stock with a $70 price target. On the other hand, Hudson Square Research analyst Daniel Ernst expects Twitter Inc (NYSE:TWTR) to plummet to $20 in the next 12 months.
Even Twitter IPO underwriters are split
The spread between analysts’ price targets is the highest among tech stocks with market value of more than $10 billion in the Russell’s 1000 Index. Even underwriters that managed the San Francisco-based company’s IPO in November are divided over the stock. Yesterday, Goldman Sachs Group Inc (NYSE:GS) raised its price target from $46 to $65 on the stock. It expects accelerated rollout of new products to boost advertising revenues. In contrast, Morgan Stanley (NYSE:MS) has a Sell rating on the stock with a $33 price target. Morgan Stanley (NYSE:MS) believes that Twitter Inc (NYSE:TWTR)’s success is far from guaranteed as Facebook Inc (NASDAQ:FB) and YouTube are strongly positioned to attract advertising dollars.
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Investors are still valuing Twitter Inc (NYSE:TWTR) at price-to-sales ratio of 28.9, almost double the 14.2 for Facebook Inc (NASDAQ:FB) and 12.1 for LinkedIn Corp (NYSE:LNKD). According to analysts polled by Bloomberg, Twitter Inc (NYSE:TWTR)’s sales are expected to rise to $217 million in Q4 with a net loss of $17.4 million. The company has more than 230 million active users, less than 20% of Facebook Inc (NASDAQ:FB)’s 1.2 billion. Analysts say microblogging company is unlikely to turn profitable until 2015. Twitter Inc (NYSE:TWTR)’s user growth has started slowing amid fierce competition.
The trouble in valuing Twitter
Today, more than 11 brokerages have a Sell rating on the stock, compared to just six that have an equivalent to Buy. Many analysts who were initially bullish on the stock changed their minds after Twitter Inc (NYSE:TWTR) shares soared way past its IPO price of $26. The biggest problem investors and analysts face in valuing Twitter Inc (NYSE:TWTR) is that there is no benchmark to determine how valuable the company will be in the future.
Twitter Inc (NYSE:TWTR) shares were up 1.49% to $58.68 in pre-market trading Wednesday.