Beverly Hills, CA -- (ReleaseWire) -- 03/14/2014 -- Laureate BVI issued a Sell rating on Twitter when the stock was trading at US$69 and predicts the stock will drop to US$27.50 in a research note issued on Friday 03/14/14.
Shares of Twitter (NASDAQ: TWTR) the micro-blogging service are currently trading at US$53.40. Twitter (TWTR) has a low of US$38.80 and a high of US$74.73. The stock’s 50-day moving average is US$58.31.
Twitter reported fourth-quarter 2013 profit of 2 cents per share which beat Zacks Consensus Estimate of 2 cents per share loss. Revenues increased 116.0% yoy to US$243 million, beating Zacks Consensus Estimate was for US$218.0 million.
According to CEO Peter Tasca of Laureate,” Twitter (TWTR) is holding its price due to shorting by traders who have to cover their positions by close of trade.” There is absolutely no justification to pay 300 times EBITA, and the price does not reflect the enterprise value of TWTR.
Laureate market research notes, Put Options on Twitter are showing significant volume. The June 30 Puts show open interest of over 19,000 and the June 50 Puts show open interest of over 31,000.
Tasca states, "whether fund managers are using the Puts as speculation of a significant price drop or simply hedging positions, it is a very large open interest and it is troubling for the stock.”
Laureate reports that the demand to borrow Twitter to short is very strong. The trading data shows that over 70% of the shares that can be borrowed from lending programs are loaned out. “It is very difficult to find shares to short” according to Tasca.
According to Tasca of Laureate BVI which has returned 23% in net profits for 2013, “we rate this stock a sell due to valuations, we do not recommend any shorting at this time due to the limited supply of stock and the substantial risk.”
Laureate reports, the upcoming earnings report in May will make or break Twitter. According to Zacks Investment Research, based on 11 analysts’ forecasts, the consensus EPS forecast for the quarter is a loss of US$0.25.
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