The long-term risk-versus-reward potential in Twitter Inc (NYSE:TWTR) and Twitter stock is constantly up for debate. But analysts at Evercore on Thursday made it known which side they are on. Their loss should be investors’ gain.
TWTR stock is under heavy selling pressure Thursday, falling as much as 3.37% on already a third of its average daily volume, thanks to a downgrade from Evercore, which lowered its rating on TWTR from “hold” to “sell.”
The firm also reduced its price target on Twitter stock to $17 from $18, suggesting an additional 13% downside from the more than 3% decline TWTR stock has lost so far Thursday.
The reason for downgrade? Evercore noted that photo-sharing app Snapchat plans to ramp up its monetization efforts this fall, which would further pressure Twitter’s own ability to draw in advertisers.
In other words, there’s no new story here. It’s the same bearish thesis we’ve known about from the two advertising behemoths Facebook Inc (NASDAQ:FB) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL). And why is it an absolute certainty that Snapchat has no execution risk, but Twitter does?
From my point of view, all of the bad news about Twitter is known and the fact that TWTR stock is selling off on this analysts note makes no sense. I’m not holding my breath expecting a quick turnaround from Twitter. The once heralded Wall Street darling must still prove it can grow its user base. But ahead of Evercore’s downgrade, Twitter stock already reflected the pessimism.
Based on Wednesday’s closing price of $20.17, TWTR stock was trading almost 38% below its 52-week high and it was down 30% over the last twelve months. Not to mention, Twitter stock had 57.85 million shares sold short (10% of its float), rising from 55 million in the prior settlement date. That’s a 25% rise from 46.2 million shares sold sort since Jan. 29.
The Bottom Line on TWTR Stock
Put all of this together: Anyone who has wanted to sell Twitter stock has likely already done so. And with CEO Jack Dorsey forging live-streaming deals with the NFL, NBA, MLB and other sports leagues, a new narrative is emerging. The risk-versus-reward on TWTR is now positive. And with Twitter stock up 40% in three months, Evercore saw an opportunity to take profits. That’s fine. But the stock is going higher from here.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
