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Twitter (TWTR) Stock Up 8.4%, Analysts Caution

By: , dated December 26th, 2013

Shares of Twitter Inc. (TWTR) closed up +5.42 or +8.4 percent on Tuesday to $69.96 per share after making a new all-time high of $70.87 in a shortened pre-holiday trading session. The stock is up +169 percent from its initial public offering price of $26 per share made on November 7th, and +56 percent from its first day’s closing price of $44.90.

Twitter stock made a new high last Friday, trading through the $60 level and most analysts’ price targets, nevertheless, several analysts have reiterated their sell recommendations citing an overvaluation of the stock and a possible short squeeze.

San Francisco, California based Twitter is a social media and microblogging service best known for allowing subscribers to “tweet”, or transmit messages limited to 140 characters, but able to send digital files such as photographs and videos. Twitter had half a billion subscribers in 2012 and is one of the top ten visited websites on the Internet. The company had its initial public offering on November 7th, going public at $26 per share.

While Tuesday’s rally in Twitter stock was a mystery, many market pundits attributed the rise to new tools the company released last week that will make Twitter ads more effective. Marketers advertising on Twitter will be able to use cookie based individually targeted ads using the customer’s web browsing history.

Twitter stock has been targeted as a “sell” by several analysts, with the latest in a report published on Tuesday by Blake Harper of Wunderlich Securities. The analyst had this to say as the stock rallied, “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.”

Fueling the stock’s rally is the enormous short interest in the stock. According to Wunderlich, as of November 29th, 17.8 million shares were held short. The company floated 11 percent of their total fully diluted outstanding shares; the analyst believes the limited amount of shares is already having a major effect on the company’s valuation. Harper has a “sell” recommendation and a $34 price target on Twitter stock.

Another analyst bearish on Twitter stock is S&P Capital IQ analyst Scott Kessler. Kessler reiterated a “sell” recommendation and a $30 price target last week. In an interview, Kessler noted that, “As an analyst who focuses on the fundamentals and has had a sell opinion on Twitter, it has been confounding and it has been frustrating,” he continued, “The company may have a lot of opportunity, but we think the stock is excessively valued at best at this point.”

Despite the analyst “sell” recommendations, Twitter stock may continue going up fueled by a short squeeze and further innovations in social media. In many cases, stock prices are driven more by perception and expectations than on current conditions, especially with new issues.

In a related item, Twitter founder Jack Dorsey was elected to join the Walt Disney Company’s (DIS) board of directors. Robert Iger, Disney’s chairman and CEO stated that, “The perspective he brings to Disney and its board is extremely valuable, given our strategic priorities, which include utilizing the latest technologies and platforms to reach more people and to enhance the relationship we have with our customers.” Dorsey will undoubtedly add to innovation at Disney.

Other News About Twitter
Jack Dorsey joins Disney’s Board of Directors
Twitter founder Dorsey joins Facebook’s Sheryl Sandberg on Disney’s board.
Australia: Sharks Use Twitter To Warn Swimmers
320 sharks have had transmitters attached to tweet swimmers of their proximity.

Other Stocks in the News
Apple’s 12.9-Inch Tablet Rumored to Launch in October 2014
12.9 inch tablet could be released by next October.
SoftBank in talks to acquire T-Mobile, discussing funding: sources
Japanese firm in talks to acquire U.S. carrier.

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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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