Analyst: Twitter Has More Downside Than Upside

Twitter

Source: http://www.flickr.com/photos/johanl/

It’s another rough day for Twitter (NYSE:TWTR) stock. Shares were off about 3 percent in early trading on Wednesday following news that the stock was once again hit with the downgrade stick, this time from analysts at Cantor Fitzgerald. The analysts, like many others, cited the stock’s enormous valuation.

“While historically we’ve reserved our ‘SELL’ rating to business models with structural challenges, we find TWTR’s valuation to be excessive and currently see materially more downside than upside,” analyst Youssef Squali wrote in a note seen by StreetInsider. The firm holds a $32 price target on the stock, representing a downside of nearly 48 percent from Tuesday’s closing price of $64.46 per share.

The note from Cantor Fitzgerald is just the latest in a string of similar actions and comments from analysts at several major financial institutions. Shares slid about 4 percent on Monday and 7.3 percent on Tuesday after analysts at Morgan Stanley and CRT Capital stepped off the bandwagon. All told, analysts hold a median price target of $45.50, a downside of nearly 26 percent. The high end of the estimate range sits at $70, though, with the low at $20, representing enormous disparity in how analysts feel about the stock.

While Twitter stock suffers deprecation via downgrade and the atrophy of post-IPO euphoria, the business itself is firing on all cylinders and is gearing up for its first earnings disclosure as a public company. The firm announced on Tuesday that it will release fourth-quarter financial results and hold a conference call on February 5 at 5:00 p.m. Eastern Time. Analysts are expecting the firm to report a loss of 2 cents per share for the quarter on revenue of $216.86 million. For the full year, analysts are looking for a loss of 18 cents on revenue of $639.13 million.

Twitter also announced that it will be answering questions about its earnings via Twitter, using the @TwitterIR account and the #TWTRearnings hashtag. This, although somewhat unorthodox in the world of investor relations, is actually sanctioned by the Securities and Exchange Commission. Precedent was set in 2013 when U.S. regulators cleared companies to disclose financial information over mediums like Twitter as long as they told investors that they would be doing so ahead of time.

So, Twitter investors, consider yourself warned. Also keep an eye out for this sort of dual-screen, real-time business-to-investor interaction in the future. JPMorgan’s failed Twitter Q&A aside, it seems inevitable that IR teams will experiment with similar live Q&A sessions during earnings calls in the future.

More From Wall St. Cheat Sheet: