Twitter’s (TWTR) share price fell to $63.75 on Friday after Ben Schachter, an analyst at Macquarie Capital, downgraded the stock’s rating from neutral to underperform. The stock price fluctuated quite a bit since the micro-blogging service went public on November 7, rising 73% on the first day of trading, then falling 2% on mixed ratings from key underwriters, and then rising 9.3% when the company introduced its self-advertising platform.
Schachter cut Twitter’s rating from neutral on December 11, to underperform, saying that though the stock has risen 40% since he gave his neutral rating, there has been no change in the company’s fundamentals to justify the increase. "We continue to believe that Twitter as a company has a bright future and many opportunities ahead," Schachter said in a research note. "However, as a stock, we believe nothing has changed over the last 15 days to justify the rise in valuation."
Macquarie currently has a $46 price target for the stock which indicates a potential downside of 37.25% from the current price.
Despite the underperform rating, which reiterates similar underperform ratings given by other analysts before Christmas, trading interest in Twitter has been high. It has been trading at almost five times its one-month average of 14 million shares. Analysts at Wunderlich Securities said: “…it appears valuation metrics are irrelevant and that investors are betting aggressively on Twitter being the next great media-technology platform.”
According to Bloomberg, 27 analysts cover Twitter, out of which 12 rate the stock a hold, and seven rate it a sell. Currently, the stock is trading at 32 times its 2014 sales, whereas Facebook (FB) and LinkedIn (LNKD) shares are trading at price-to-sales ratios of 13.6x and 12x respectively.