Buy or Sell? Twitter’s Lead IPO Underwriters End Silence and Set Price Targets
Are you invested in Twitter or thinking about grabbing a few shares? The quiet period for Twitter’s IPO has ceased, allowing financial institutions to start speaking their mind about the company’s potential financial future. This “waiting period” is the time between a company’s IPO registration and the time when the SEC declares the registration statement effective. During this quiet period the government limits the information a company or other parties of interest can give to the public or the hype they can build up.
As of now Twitter shares are trading at $41.01, 57% above Twitter’s IPO price of $26! So what do investors think about the red hot stock going forward?
Two of the five financial analysts gave Twitter a buy rating, two others gave it a neutral rating and one gave it a sell rating. Between the group, the average price target was $41 or exactly where the stock is trading at the moment.
Here is a breakdown of the underwriters’ ratings and comments:
Price Target: $46
Comment: We believe there is substantial long-term value in Twitter’s potential to become the leading platform for real time mass communication… We see opportunity for growth acceleration and positive estimate revisions.
Price Target: $50
Comment: The company is arguably the ‘best play’ on mobile in our coverage universe… shares appear very expensive… investors today are likely paying well below the the current 15x consensus 2015 revenue for Twitter.
Rating: Equal Weight
Price Target: We are optimstic [sic] on Twitter’s ability to expand the socially enabled ad market… However, a current ~30b enterprise value appears to reflect a high likelihood of success with these still-nascent initiatives.
Price Target: $40
Comment: We believe Twitter has fundamentally changed the way people communicate and consume information… However, we believe Twitter is fairly valued at current levels.
BofA Merrill Lynch
Price Target: $36
Comment: We are constructive on long-term fundamentals… However, with the stock discounting outstanding execution… we have lower conviction on near-term stock upside vs. peers.
The verdict on Wall Street appears to be cautious as the stock has been on a pretty big tear since its initial pricing and investor speculation. According to a study reported by the Wall Street Journal, of 700 U.S. IPOs conducted by Ipreo between 2006 to 2011, 71% of IPO’s received an average “buy” rating, while only 28% had a “hold” rating.
What do you think? Is it time to drop Twitter as if it were hot?