Twitter gets two big analyst upgrades but is now the time to sell the stock?
Is Twitter's stock worth $70? How about $75?
Two sets of analysts are saying the microblogging site could move quite a bit higher than its current price. Telsey Advisory Group initiated their coverage on Twitter with a $70 price target on Wednesday, matching Evecore's then-highest expectation. On Thursday, Stifel Nicolaus outdid them all with a $75 price.
According to data compiled by CNBC contributor Andrew Busch, editor and publisher of The Busch Update, 10 analysts have a "sell" rating on Twitter, 16 say "hold", and only seven are at "buy". That puts the average analyst at "hold" with a price target of around $46.63. However, he says recent increases in estimates are due to a better appreciation of Twitter's plans.
"When analysts first started covering it, they had a low price target – maybe $7 or $9 above the initial IPO," says Busch. "Now, as more people are looking at it, they're starting to raise those estimates."
For Busch, Twitter needs to succeed in transitioning from a newsfeed site to an e-commerce site. For that reason, Busch is somewhat optimistic about the company's long-term prospects.
"They hired the ex-CEO from Ticketmaster (Nathan Hubbard) to help them with this transition to be able to not only advertise companies, but to be able to sell products right from the site," says Busch, who also believes the company will move towards more geolocation in its e-commerce offerings.
But, if you're thinking of buying Twitter's stock now, Busch says you should wait just a few weeks more.
"Watch February 5th," says Busch. "That's their earnings report. We'll get more information out of them. I wouldn't touch this until we see what their plans are. "
(See: CNBC's Social Media coverage)
For Steven Pytlar, Chief Equity Strategist at Prime Executions, the price targets of Telsey and Stifel Nicolaus may be a bit of a reach based on the technicals. And, he sees a bit of risk ahead.
"Right now, the charts are telling us that $70 might be the top of the range," says Pytlar. "The reason that's telling us that is because in mid-December, there was this reversal pattern that showed up right at $70."
Pytlar explains the specific technical reason why he sees $70 as the top price for Twitter – a pattern called an "evening star reversal".
"In mid-December, there's what's called an 'evening star reversal pattern'," says Pytlar. "It's a three-candlestick pattern. You have sharp move up one day. The next day, it tries to make a new high, moves up, and then lots of selling comes in [and] people get out of positions; the stock fails to close at that higher price. And then the next day – the third day – price actually closes lower. That tells us there's exhaustion and that the post-IPO rally might be ending. And then that defines the resistance level right there. In Twitter, that's about $70."
Though Twitter's stock price tested the $70 level again in early January, it failed to break through. Pytlar believes that will happen again should shares make it back to the $70 mark.
"We think that's where people are going to start taking profits, look to sell, [and] monetize gains they've made on the post IPO rally," says Pytlar. "Really, there's a fair amount of risk. So, the charts are telling us to be careful. A support is way lower, at about $55."
To see more of what Busch has to say about the fundamentals and for Pytlar's charts on Twitter, watch the video above.
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