Twitter shares drop on fears about advertising revenue

SAN FRANCISCO -- The Street's Jim Cramer was asked Monday about Twitter.

He called the money-losing social media high flier a “love stock.”

If that's the case, the honeymoon may soon be over.

Twitter shares fell sharply Monday after a Morgan Stanley analyst cut his investment rating to the equivalent of sell and warned that advertisers are more likely to spend their dollars on Twitter’s competitors.

Shares closed down 4% to $66.29. But they have nearly tripled since Twitter went public at $26 on Nov. 7. Twitter’s stock market value is a heady $37 billion.

Most of the gains took place over the last month after the company rolled out a new program to target ads.

Morgan Stanley analyst Scott Devitt warned Monday that the success of those advertising efforts are “far from guaranteed at this early stage.” He also said that Google’s video-sharing website YouTube and the giant social network Facebook were more likely to benefit as advertisers shift some ad dollars to online from television. Devitt has a price target of $33 on Twitter.

At least five other analysts have downgraded Twitter in recent weeks as its shares have soared.

Facebook closed the trading day up nearly 5% to $57.18. SunTrust analyst Robert Peck reiterated his “buy” rating on the stock and raised his 2014 target price to $65 from $55.

So what's a fair valuation for Twitter? Cramer said he couldn't come up with one. He also said he was proud of analysts for not concocting reasons to buy the stock at current levels because there aren’t any.


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