Are Twit­ter shares bot­tom­ing

Financial Mirror (Cyprus) - - FRONT PAGE -

Twit­ter Inc. (NYSE: TWTR) re­mains more than dif­fi­cult for most in­vestors to value us­ing tra­di­tional earn­ings and rev­enue met­rics. With mil­lions upon mil­lions of shares un­der the IPO lock-up hav­ing been freed, sev­eral an­a­lysts have raised their rat­ings in the past cou­ple of weeks. Shares have even bounced and tried to sta­bilise, even if the past week has been a slight neg­a­tive.

This is the sort of move­ment that might make some in­vestors think that Twit­ter has bot­tomed out. Twit­ter’s stock is down al­most 25% since its earn­ings re­port.

Sev­eral Wall Street an­a­lysts have raised Twit­ter, with most rat­ings go­ing from the equiv­a­lent of Sell up to the equiv­a­lent of Hold or Neu­tral. These are the an­a­lyst calls seen in the last two weeks: Mor­gan Stan­ley raised Twit­ter to Neu­tral from Un­der­per­form, as did Bank of Amer­ica Mer­rill Lynch. At­lantic Eq­ui­ties raised Twit­ter to Neu­tral from Un­der­weight with a price tar­get of $35, and Wun­der­lich raised the rat­ing to Hold from Sell with a $38 price tar­get. Sun­Trust was the most pos­i­tive by rais­ing the rat­ing to Buy from Neu­tral, rais­ing its price tar­get to $45. We have not seen a sin­gle down­grade since all those locked-up shares were let loose.

On the val­u­a­tion front, Twit­ter still trades at close to 23 times rev­enues and 129 times for­ward earn­ings. If you are buy­ing Twit­ter, it is be­cause you be­lieve there will be value in 2016 or even fur­ther out. Still, the ma­jor price de­clines have abated, even if the shares pulled back from last week’s highs by 5% or so. We once warned that Twit­ter shares were at risk of break­ing un­der the $26 price at its ini­tial pub­lic of­fer­ing. That was when shares were try­ing to break un­der $30, when the stock man­aged to get un­der $30 on one day. Now it seems as though the mar­ket mak­ers from the un­der­writ­ing syn­di­cate firms are also de­fend­ing the stock, and the an­a­lysts who are now able to get in close to that IPO price are no longer down­grad­ing the stock.

Twit­ter will not be im­mune if the broader mar­ket sell­ing continues, nor if the treat­ment of spec­u­la­tive no-earn­ings high­mul­ti­ple stocks re­mains cau­tious. That be­ing said, it seems ever eas­ier to think that the ma­jor sell­ing waves have pe­tered out. Mon­day’s close with a drop of $0.19 to $32.07 may hardly seem like a suc­cess. Now con­sider that the low of $29.51 was hit on May 7 and Twit­ter’s stock has not closed un­der $32.00 since May 8.

You never know what the real bot­tom is on any stock. That is par­tic­u­larly true for a stock like Twit­ter.

And there is that whole dif­fi­culty in find­ing a proper val­u­a­tion. How­ever, Twit­ter shares sure act like they are try­ing to find a point of sta­bil­i­sa­tion. (

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