Shares of Twitter Inc. (NYSE: TWTR) tumbled 4% Monday following a downgrade to Underweight by Morgan Stanley (NYSE: MS). The stock continues its slide today, dropping another 6.5% with no other news driving the price.
Perhaps even worse than the downgrade, the Morgan Stanley analyst put a price target of $33 on the stock, down roughly 50% from yesterday’s closing price. The reason for the downgrade is a concern that Twitter’s ability to compete for advertising dollars against Facebook Inc. (NASDAQ: FB) or Google Inc. (NASDAQ: GOOG) is restricted by Twitter’s limited advertising platform.
Facebook, for example, has proven that it can convert shoppers into buyers and Google has hit a new gold vein with it’s Product Listing Ads. Twitter has yet to show Facebook’s ability to drive conversion or Google’s ability to monetize its core business.
That doesn’t mean Twitter is toast, even though it is projected to post an earnings loss this year. What it does mean is that investors looking for share price growth may have to wait, something for which they’re not known.
Twitter’s stock is down 6.4% at $62.04 with about an hour left in Tuesday’s session. The stock’s post-IPO range is $38.80 to $74.73.