Twitter Posts Biggest-Ever Decline After Macquarie Downgrade

Twitter Inc. (TWTR) fell the most since it debuted on the New York Stock Exchange after Macquarie Capital downgraded the social-networking company, saying the stock has gone “too far, too fast.”

The shares of the microblogging service fell 13 percent to $63.75 at the close in New York. The stock had almost tripled through yesterday since a Nov. 6 initial public offering.

Ben Schachter, an analyst at Macquarie in New York, lowered his rating from neutral to underperform -- the equivalent of sell. The shares have jumped 40 percent since Macquarie initiated coverage on Dec. 11, without any improvement in Twitter’s fundamentals, Schachter said in a report.

“We continue to believe that Twitter as a company has a bright future and many opportunities ahead,” he said. “However, as a stock, we believe nothing has changed over the last 15 days to justify the rise in valuation.”

The recent rally has put shares of San Francisco-based Twitter well above Schachter’s 12-month price target of $46.

The unprofitable company was valued at $41.6 billion as of yesterday’s close, making it larger than Time Warner Cable Inc. (TWC), Viacom Inc. (VIAB) or Target Corp. (TGT) Investors expect Twitter to benefit from a surge of mobile-advertising sales. Still, the wide discrepancies in analyst revenue estimates have raised concerns, Schachter said. Twitter’s IPO had a relatively small number of underwriters, leading to a situation where more than a dozen banks initiated coverage without getting detailed guidance from management, he said.

Photographer: David Paul Morris/Bloomberg

Investors expect Twitter Inc. to benefit from a surge of mobile-advertising sales. Close

Investors expect Twitter Inc. to benefit from a surge of mobile-advertising sales.

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Photographer: David Paul Morris/Bloomberg

Investors expect Twitter Inc. to benefit from a surge of mobile-advertising sales.

Twitter also needs time to build up its headcount, according to Schachter. The company has half as many employees as Facebook Inc., the world’s biggest social-networking site.

“It takes time and people to execute against opportunities,” he said.

To contact the reporter on this story: Nick Turner in New York at nturner7@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net; Pui-Wing Tam at ptam13@bloomberg.net

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