Twitter Inc (NYSE:TWTR) stock was trading down on this morning’s pre-market after the firm received a downgrade from Cowen & Co. The firm maintained its Market Perform rating on Twitter stock but lowered its price target from $38 to $34 as the social network deals with failure to expand users and sales as well as instability in leadership.
On Tuesday, after rumors that Twitter was set to be bought out by rival Facebook Inc (NASDAQ:FB) broke, shares performed strongly. The firm’s shares finished the day selling for $36.24, up 5.9% for the full day’s trading. After buying in the early part of the morning drove shares up a fraction in the pre-market, news of the new Cowen & Co. price target erased those gains, and set the company on a path to open lower.
Twitter gets downgraded
The Cowen & Co. downgrade at Twitter comes on the back of several poor Wall Street forecasts for the firm in recent months, and a lack of confidence in the firm’s leaders among investors.
Dick Costolo, the firm’s last CEO, served his final day on Tuesday and he is being replaced today by Jack Dorsey, the CEO he outed. Investors are not clear on the direction the firm will take in the months ahead in order to protect the value of their shares.
With slow user growth and big work like Project Lightning still months down the road, the firm is set to show poor earnings for the three months through June. Twitter is set to report those numbers at the end of July.
Wall Street is nervous heading into that release. 24 of the 38 analysts following the firm rate it at Hold, while just 8 tell clients to Buy shares in the firm. The median price target on stock in Twitter is now at $45.50, down from more than $55 before April’s earnings.
Twitter buy out rumors drive shares
Since Twitter revealed lower than expected numbers for the first three months of the year trading has been driven strongly by rumors that the company was about to be bought out by a rival. Google Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) and Facebook have appeared at the top of lists of likely buyers, but there has been little solid info on an offer.
Charlie Gasparino of Fox Business News said on Tuesday morning that the firm simply had to be sold because its current problems at the top had erased any chance of growth. He said that Wall Street bankers involved in the tech world had told him that the leadership at the firm was open to a sale.
SunTrust analyst Robert Peck appeared on CNBC’s Fast Money on Tuesday and talked about those rumors. He said that in order to stop the rumors the firm would need to put a new CEO in place. With Jack Dorsey taking the seat for the first time this morning, things could either move at any pace.
The market will wait on his statements about here he sees Twitter in the coming months in order to judge his plans for the future of the firm. Mr. Peck downgraded his view on Twitter just before the firm’s poor results were made public back on April 27.
He put a $50 price target on the firm heading into those results, but removed it in the months since. He now has a Neutral rating on shares with no specific price target.