Welcome to our new website! Let us know what you think..

Register to get unlimited access to all of 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
Citywire TV
Play Gervais Williams: the real reason to worry about Quindell

Gervais Williams: the real reason to worry about Quindell

Citywire AA-rated manager Gervais Williams has argued that sentiment is the true danger to Quindell.

Play AA-rated Lofthouse: 'maverick' tobacco settlements won't stop M&A

AA-rated Lofthouse: 'maverick' tobacco settlements won't stop M&A

Henderson International Income trust manager Ben Lofthouse shares his thoughts on recent developments in the tobacco sector in this video.

1 Play Renewable energy: what I found on my solar farm trip

Renewable energy: what I found on my solar farm trip

Renewable energy is attracting a lot of investor interest, so I headed to the UK's largest solar farm to find out more.

Your Business: Cover Star Club

Profile: Quilter Cheviot boss Baines sees more consolidation ahead

Profile: Quilter Cheviot boss Baines sees more consolidation ahead

Nineteen months on from the merger of Quilter Cheviot chief executive Martin Baines says the deal is now paying dividends.

Wealth Manager on Twitter