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Twitter NYSE Honeymoon Is Over As Stock Price Takes Another Nosedive

Today at market opening, Twitter shares ( NYSE:TWTR) dropped once again.
Shares were at $60.27, down 5.46 percent compared to Friday's closing price of $63.75. This nosedive marks the end of the honeymoon between Twitter and the NYSE as many analysts stated that shares are overpriced. Until now, the stock held strong amid those reports, but that seems to be coming to an end.
It is not the first drop as shares were already down 13 percent on Friday, shaving $5 billion off Twitter's market capitalization. It was a big
correction of Thursday's good performance —
on Thursday, shares popped 5 percent for no
apparent reason.
Many analysts find that Twitter is an expensive
company. With a market cap of $33.6 billion,
the company has yet to turn a profit — analysts
don't expect to see any profit before 2015. But
this pessimistic trend on the analyst's side seems
to be increasing. On Friday, Macquarie analyst
Ben Schachter downgraded Twitter.
According to Bespoke Investment Group, the
average price target stands at $44.27, around 37
percent below today's trading price.
But why is the stock price dropping today? The
Twitter IPO was a great sign for the entire tech
industry. Private companies saw that the stock
market could be friendly again with tech
companies — and now, everyone wants to IPO.
When Twitter became a public company on
November 7, the company priced its IPO at $26
a share. Shares popped 74 percent on that day.
After this very good IPO performance, the
stock price has been relatively flat.
Many commented that the IPO was underpriced
on purpose to make a big splash on the NYSE.
Leaving money on the table was a way to
improve the longterm prospects and overall
image. Shares are still up around 135 percent
compared to the IPO price.
Yet, there was a recent turning point for Twitter
shares. When the company introduced
retargeted ads in early December, the
advertising industry was very enthusiastic. Ads
would soon be more relevant thanks to browser
cookies and more user information. And
shareholders voted with their wallets.
Shares went from $44.95 on December 6 to
$73.31 on December 26. It represents a 63.1
percent increase, or a $15.7 billion increase in
market capitalization. But it wasn't sustainable
on the long run. This 3-week honeymoon was
great while it lasted, but it's time to come back
to reality.

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