Twitter's glorious run, or perhaps flight, at the stock exchange has finally come to an end. After flying high for several weeks ever since Twitter went public in November, the stocks of the micro-blogging site nosedived following a downgrade rating.
Macquarie Capital downgraded Twitter on Friday, triggering the company's biggest decline at the stock exchange since it first went public on the NYSE.
According to analyst Ben Schachter, the stock has gone "too far, too fast" and its wings needed to be clipped. On Thursday, Twitter's shares witnessed an all-time-high close of $73.21 but after the downgrade rating, the company's stock price fell by 13.04 percent to settle at $63.75 by the trading day's end, shedding nearly $5 billion in market value in the process.
Schachter, who downgraded the company's rating to "underperform" from a previous rating of "neutral," said he was concerned about the speed at which the stock prices were rising. In stock market terms, an underperform rating may be seen as a euphemism for "sell." Despite the downgrade, however, Schachter said Twitter is still a solid company with a lot going for it.
"We continue to believe that Twitter as a company has a bright future and many opportunities ahead," Schachter told clients in a research note. "However, as a stock, we believe nothing has changed over the last 15 days to justify the rise in valuation."
Most analysts are likely to think the same because Twitter must start turning a profit before any share price hikes can be justified. It will take both a profitable business model as well as a bigger employee base to turn the company into a money making powerhouse.
Analysts have also issued a hold rating on the stock with many advising to sell and in light of the fact that there are been little to no developments in the company as of late, the adjusted ratings will probably stand for a while.
