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Twitter shares drop, Morgan Stanley reduces its rating

twitterAfter Twitter Inc.s rating was reduced on the stock by Morgan Stanley, the companys shares fell 3.9%. The microblogging service is pointed by one of the banks managing the Initial Public Offerting of the company to lose online advertising revenue to larger competitors such as Facebook Inc.

After the Initial Public Offering that took place two months ago, the companys stock has more than doubled the initial price of 26 dollars. As Bloomberg already reported, the shares were cut to underweight at Morgan Stanley.

One of the analysts working at Morgan Stanley – Scott Devitt – made a statement in Tuesday, saying that the company trades at a premium to peers such as Facebook Inc. and Google Inc. Here is what he wrote: “As competition for online ad dollars intensifies, we guide investors to google and Facebook, dominant platforms with more attractive risk/reward. In our view, success is far from guaranteed at this early stage.”

Mr. Devitt also explained that it is quite possible that TV ad budgets go to Googles YouTube and Facebook, no matter that Twitter is trying to generate better sales through television partnerships. The price target of Twitter stock, set by Scott Devitt is 33 dollars.

As reported by Bloomberg, the researcher EMarketer Inc. forecast that Twitters share of the digital advertising market in the U.S. may rise to 2.2% in 2015, which is 1.2% more than the 2013s numbers. The estimates of EMarketer for Facebook Inc. point that the companys share is likely to increase from 7.4 last year to 9%; and the Google Inc.s is expected to expand its piece from 39.9% in 2013 to 42.3% next year on the U.S. market.

Mr. Scott Devitt also commented the situation about Twitter by citing Pew Research Centres Internet project, which found that 90% of Twitter users also have Facebook accounts, while only 22% of Facebook users have Twitter accounts. The 230 million users of Twitter are about one fifth of Facebooks ones. Mr. Devitt, who is currently an analyst in Morgan Stanley wrote: “There is still a risk that Twitter remains a niche product. Despite the ease at which users can sign up for Twitter, we thinkt it is inherently more complicated to understand how to get the most out of Twitter, compared to Facebooks service, which is easier to use.”

According to CNN Money, the current share price of Twitter Inc. is 3.53% down, and its one-year return rate is 6.85% down. The 21 analysts offering 12-month price forecasts for Twitter Inc. have a median target of 46.00, with a high estimate of 65.00 and a low estimate of 30.00. The median estimate represents a -22.43% decrease from the last price of 59.29.

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