Twitter Downgraded: 'Nothing Has Changed...to
Justify the Rise in Valuation' -- WSJ Blog
Dec 27 at 10:20
(This story was published by The Wall Street Journal Online's MoneyBeat
blog at http://blogs.wsj.com/moneybeat/)
By Steven Russolillo
Twitter Inc.'s high-flying stock has gone too far, too fast.
That view comes courtesy of Macquarie Equities Research, which cut its
rating on the microblogging site Friday morning to underperform from neutral,
while maintaining its $46 price target.
The catalyst for the firm's downgrade is simple: Twitter hasn't done
anything to justify nearly tripling since last month's IPO.
"We believe nothing has changed the fundamentals to justify the sharp rise
in shares over the past few weeks," Macquarie analyst Ben Schachter wrote to
clients, while adding that the one-page research note may be "among the shortest
downgrade notes you've ever read."
Shares dropped as much as 5.2% Friday morning. The stock had risen five
days in a row, gaining 76% this month and 182% since its IPO in early November.
Mr. Schachter notes the firm launched its coverage of Twitter on Dec. 11,
when the stock was priced at $46. Since then, the stock jumped about 40%,
compared to a 2% rally for the S&P 500, "on the back of virtually no news," he
"We continue to believe that Twitter as a company has a bright future and
many opportunities ahead," Mr. Schachter says. "However, as a stock, we believe
nothing has changed over the last 15 days to justify the rise in valuation."
Mr. Schachter also thinks he'll be the first of several analysts who'll
act on Twitter's latest rally. Nineteen of the 26 Wall Street analysts that
cover Twitter have the equivalent of "hold" or "sell" ratings on it, according
to Thomson Reuters.
"Because of Twitter's run and rules around price targets, we expect many
other analysts will quickly have to either justify raising targets (based on
little new information) or downgrade," he says.
--Alexandra Scaggs contributed to this report.
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