Twitter (TWTR) Graduates to Cult Status; Analyst Reiterates Sell

December 24, 2013 10:58 AM EST
Get Alerts TWTR Hot Sheet
Price: $16.61 +0.18%

Rating Summary:
    7 Buy, 36 Hold, 11 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 24 | Down: 17 | New: 14
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Wunderlich Securities Tuesday reiterated a Sell rating on Twitter, Inc. (NYSE: TWTR) with a price target of $34.00. Comments follow Twitter's ballistic 5-day, 18% rally, which has left many level-headed investors scratching their heads. Meanwhile, momentum traders are unrelenting and unwilling to give ground. Analyst Blake T. Harper ties the move to a short squeeze/ small float and the stock's 'cult status'.

"While the company is growing revenues faster than its fastest growing peers and we do recognize the potential for the company to capture larger portions of the mobile and TV advertising market, it appears valuation metrics are irrelevant and that investors are betting aggressively on Twitter being the next great media-technology platform," said Harper.

"As of 11/29/13, 17.8 million of TWTR shares were held short, which is 22% of the available float of 80 million shares. The float is only 11% of the total fully diluted outstanding shares, which we believe is creating a significant leveraging effect on the market value of the company. Public market investors are as a whole only able to access 11%, or 80 million shares, of the company, which means there is $5.2 billion of public investor capital supporting the $46 billion market cap," added the analyst.

Twitter has yet to report quarter as a public company, and those betting the stock will be then next big media and tech platform are taking risk that isn’t justified based on valuation, continued Harper.

"The stock trades at objective measures that are hard to justify relative to peers and the next 2-3 years of expected results for the company (See Figure 1). While we believe the valuation is excessive and would like to see the company report Q4 results, we acknowledge the stock may be influenced by the investor sentiment to own what they perceive as the next dominant media/tech platform and a limited float that may push the stock higher in the near term."

For an analyst ratings summary and ratings history on Twitter, Inc. click here. For more ratings news on Twitter, Inc. click here.

Shares of Twitter, Inc. closed at $64.54 yesterday.

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