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Keep an Eye Out for Analyst Upgrades on Twitter


After taking a shellacking, Twitter may be reaching a price level where analysts are willing to issue a buy recommendation.

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Twitter (NYSE:TWTR) is having its sixth busiest day in terms of volume, and it's a little after noon.

The bulls may make the case that higher prices await Twitter because there won't be many folks left to sell after this shellacking, while the bears will point to the still-high valuation to defend their position.

I would watch for analyst upgrades based on the price action.

Twitter has by far the most bearish coverage among social media stocks on Wall Street. The current distribution is seven buys, 13 holds, and 11 sells.

For comparison, Facebook (NASDAQ:FB) has 37 buys, seven holds, and zero sells.

LinkedIn (NYSE:LNKD) has 25 buys, 12 holds, and zero sells.

Yelp (NYSE:YELP) has 21 buys, 11 holds, and zero sells.

And finally, Pandora (NYSE:P) has 20 buys, nine holds, and a mere two sells.

The chart below shows the distribution of analyst ratings among the aforementioned social media stocks.
Click to enlarge

Analysts at firms like RW Baird and SunTrust (NYSE:STI) have Neutral ratings and $50 target prices, implying a 44% expected return from here. There are also some firms with sell ratings that could come up to Hold/Neutral, like UBS (NYSE:UBS), which has a $35 target price, and Wunderlich, which has a $38 target price.

It will be interesting to see if any firm is willing to make a stand here with the stock in uncharted territory.

Twitter: @MichaelComeau
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No positions in stocks mentioned.
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