Post date: Dec 27, 2013 8:13:31 PM
Reuters Video Report - In the less than two months since its debut, Twitter stock has nearly tripled- but not that much has changed fundamentally besides its stock price.
S&P Capital IQ's Scott Kessler says the situation is dangerous for investors
SCOTT KESSLER, EQUITY ANALYST, S&P CAPITAL IQ"You have investors, institutional and retail alike buying into this stock for no other reason than the momentum being extremely positive. We think, look there is a good fundamental story to tell but look this is a company that at this stage is not generating earnings. We are not expecting earnings until 2015 and to be frank people at this point are buying the stock we believe simply because they have a fear of missing out and that is not necessarily an investment theses that we or we think anyone else should feel comfortable with at this point."
Kessler has a sell rating on the stock and a price target of $43.
And just Friday Macquarie's Ben Schachter downgraded Twitter to underperform- with a price target of $46- saying nothing justifies the sharp rise in shares over the past few weeks.
But that's just the stock price- the analysts don't dispute Twitter's success- the 7 year old company has about 250 million users- and dominates social media around the globe. Its revenue in its most recent quarter doubled from a year ago.
Kessler warns the new year could bring new problems- investors that have delayed selling to avoid capital gains taxes in 2013, may dump shares. And insiders will also have the opportunity to cash out when lockups expire in a couple months.
SCOTT KESSLER, EQUITY ANALYST, S&P CAPITAL IQ
"While Facebook when it came public it definitely had a lot of insiders selling a lot of shares, in Twitter's case the company was the only seller of shares in the IPO process and so as a result you probably have substantial insiders thinking about and looking at sales as the first lock up expiration hits in February and that could be much more of an impactful event for Twitter than it was for Facebook."
And then there are the earnings- the company is not yet profitable- and will report its first results as a publicly traded company in the New Year.