Twitter awoke with a huge hangover on Thursday as investors at the market open scrambled to decide what about the companies first earnings announcement was positive.
Shares tumbled 23 percent at the open as analysts were trotting out their notes and on the whole, there were stabs at the positive, and lots of talk about “potential” for the still-young company.
UBS cut Twitter to sell from neutral and dropped the price target to $42 from $45, citing the biggest reason for the stock selloff, fears about user growth.
“Given the likely forward effort (multiple quarters) to improve user growth & engagement (including product development costs), we see little potential for upside in estimates over coming quarters. Even after last night’s stock correction, Twitter remains one of the most expensive stocks in our universe,” the bank said in a note.
Eric Sheridan and other analysts at UBS say investors can expect underperformance in the medium term with headwinds looming: a small February employee-share lockup and a bigger one in May. Get past these and providing Twitter can prove a “clearer trajectory of user and advertising growth,” he says they could get more constructive.
And Pivotal Research left a $34 price target and a sell rating. What Pivotal likes is that the company still maintains “significant value” for advertisers at its current scale, but valuation is still too robust.