Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Why Morgan Stanley has downgraded Twitter

Why Morgan Stanley has downgraded Twitter

Morgan Stanley has downgraded popular social media company Twitter to underweight over advertising revenue fears, prompting a 3.9% drop in the stock on Monday.

Twitter shares have been flying over the past two months as investor faith in the social media giant’s ability to expand its share of the online advertising market has grown.

But this faith may be misplaced according to Morgan Stanley analyst Scott Devitt. In a note to investors, Devitt wrote: ‘Twitter currently trades at a premium to peers and is above our bull case, which assumes that brands will strongly embrace Twitter’s Amplify TV tie-in product.’

‘However, as the competition for online ad revenue intensifies, we see TV ad budgets as most likely to go to the largest distribution platforms such as YouTube and Facebook first, and then later to smaller platforms including Twitter’, he continued.

Morgan Stanley has set a price target of $33 a share, within a range of $61 to $18 dollars.

The firm is yet to make a profit but has still got investors in a flap. The stock price has risen more than 155% since its November IPO price of $26, closing yesterday at $66.29.

In Morgan Stanley’s view there is a risk users will stop flocking to the San-Francisco based website and it will remain a niche product due to its complexity in comparison to Facebook.

As the chart below shows significantly more Twitter users also use Facebook than vice-versa.

Macquarie downgraded the stock last month in what analyst Ben Schachter described as ‘the shortest downgrade note you’ve ever read,’ maintaining a $46 target price.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play HSBC's Stephen King warns of 'enormous' Brexit deficit danger

HSBC's Stephen King warns of 'enormous' Brexit deficit danger

Brexit will weaken the economy, fail to boost exports and lessen the country's ability to fund its 'enormous' deficit, according to HSBC's senior economic adviser Stephen King.

Play Premier's Smith: electricity and water can be a good mix

Premier's Smith: electricity and water can be a good mix

Exposing your person to electricity and water simultaneously is ill-advised, but what about your portfolio?

Play Citywire 10k: video highlights

Citywire 10k: video highlights

Citywire held its sixth annual charity run last week, which hosted over 200 people and raised £14,000. Here are the video highlights.

Your Business: Cover Star Club

Profile: gearing up for the shift from consolidation to start-ups

Profile: gearing up for the shift from consolidation to start-ups

‘I think the industry is evolving rapidly, but not necessarily as a whole,’ says the head of recently launched Charles Nicholson AM

Wealth Manager on Twitter