Twitter Inc shares slipped on Monday after some of the five lead underwriters of its initial public offering said the social media firm may not achieve Facebook-like scale and its stock may not rise much higher.
In their first research reports since the November IPO, only Deutsche Bank and Goldman Sachs recommended buying the stock. Morgan Stanley and JP Morgan issued the equivalent of "hold" ratings. One analyst, Justin Post of Bank of America Merrill Lynch, initiated coverage with a sell rating and valued shares at $36, according to theflyonthewall.com.
Twitter shares dipped 1.3% to $41 U.S. on Monday. After an explosive debut on November 7, when shares closed more than 70 percent above the $26 U.S. IPO price, Twitter has churned for weeks in the low $40s.
At $41 U.S., the San Francisco-based company still trades at roughly 20 times estimated 2014 revenues, a multiple that dwarfs that of social media peers like Facebook Inc and LinkedIn Corp at roughly 11 and 17.6 times, respectively.
Firms that played a role in the IPO were not allowed to issue recommendations on the stock during a three-week span following the IPO known as the "quiet period." Their projections, published Monday, added little clarity to the debate over a fast-growing but still unprofitable company that has divided opinion on Wall Street.
Twitter's IPO was easily the most highly anticipated technology offering since Facebook's in 2012. Some on Wall Street have questioned whether Twitter will ever gain the same kind of vast user base Google Inc and Facebook have relied on to grow their businesses.
Although Twitter has rapidly revved up its revenue engine in the past year, investors are counting on it to continue delivering significant top-line gains. The company said last month that revenue in the third quarter more than doubled from a year ago to $168.6 million U.S.
Goldman Sachs analysts led by Heath Terry saw "substantial opportunity" for growth acceleration even above Twitter's current pace as it expands internationally, thus justifying Goldman's $46 U.S. price target.
Goldman was the lead underwriter on Twitter's IPO.
Eight out of 22 analysts so far issued a hold rating on Twitter, while nine recommended "buy" and five "sell," according to Thomson Reuters data.
J.P. Morgan analyst Doug Anmuth, who valued shares at $40 U.S., warned that the stock was priced at a "significant premium" to Facebook and LinkedIn.
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