Twitter Inc. (TWTR:US), the microblogging service that went public in November, fell for the fourth straight day as doubts rise about whether the company can deliver enough sales growth to justify its valuation.
The San Francisco-based company, whose shares closed at a record high of $73.31 last month, declined 3.8 percent to $57.05 at the close in New York. The stock has dropped 17 percent so far this week.
Twitter, which is still well above its initial public offering price of $26, was hit with analyst downgrades this week and Cowen & Co. initiating coverage of the stock with the equivalent of a sell rating. Twitter may not attract enough advertising dollars as customers see better results from rivals Facebook (FB:US) Inc. and LinkedIn Corp., according to Cowen’s note.
“Twitter is a popular social platform, but shares are too rich,” Cowen analysts John Blackledge and Thomas Champion said in the note yesterday.
Twitter now has the equivalent of 11 sell ratings, 11 holds and six buys from analysts, according to data (TWTR:US) compiled by Bloomberg. Facebook, Google Inc. and LinkedIn have no sell ratings, according to data compiled by Bloomberg
The stock decline comes even as rival Facebook touched an intraday record today. Facebook fell 1.7 percent to $57.22 at the close in New York, after doubling last year amid optimism that the company can drive revenue growth.
Twitter isn’t delivering the same results as Facebook and LinkedIn, according to a survey of advertising buyers by the Cowen analysts. Just 5 percent of respondents thought Twitter offered the highest return on investment for ad spending, below the 60 percent who chose Facebook and the 25 percent who chose LinkedIn, according to the Cowen note. There are also questions about ad inventory with Twitter’s slowing user growth and engagement, the analysts said.
Will Stickney, a spokesman for Twitter, declined to comment.
Twitter, which will report its first quarterly results as a public company on Feb. 5, may have expanded revenue by 94 percent to $217 million (TWTR:US) during the final period of 2013, according to analyst estimates compiled by Bloomberg.
Cantor Fitzgerald also downgraded Twitter to sell from hold earlier this week. Youssef Squali, an analyst at Cantor, said he found the company’s “valuation to be excessive and currently see materially more downside than upside.”
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