Twitter Inc., the social-networking company that has seen its shares soar since debuting on the New York Stock Exchange last month, was downgraded by Macquarie Capital, which said the stock has gone “too far, too fast.”
Ben Schachter, a Macquarie analyst in New York, lowered his rating from neutral to underperform -- the equivalent of sell. The shares have jumped 40 percent since Macquarie initiated coverage on Dec. 11, without any improvement in Twitter’s fundamentals, Schachter said in a report.
“We continue to believe that Twitter as a company has a bright future and many opportunities ahead,” he said. “However, as a stock, we believe nothing has changed over the last 15 days to justify the rise in valuation.”
Shares of San Francisco-based Twitter fell 5.5 percent to $69.28 as of 9:57 a.m. New York time. Through yesterday, the stock had almost tripled from its $26 IPO price. That has put it well above Schachter’s 12-month price target of $46.
The unprofitable company was valued at $41.6 billion as of yesterday’s close, making it larger than Time Warner Cable Inc., Viacom Inc. or Target Corp. Investors expect Twitter to benefit from a surge of mobile-advertising sales. Still, the wide discrepancies in analyst revenue estimates have raised concerns, Schachter said. Twitter’s IPO had a relatively small number of underwriters, leading to a situation where more than a dozen banks initiated coverage without getting detailed guidance from management, he said.
Twitter also needs time to build up its headcount, Schachter said. The company has half as many employees as Facebook Inc., the world’s biggest social-networking site.
“It takes time and people to execute against opportunities,” he said.