Twitter Inc. shares fell as much as 6.7 percent after Morgan Stanley reduced its rating on the stock, saying the microblogging service may lose online advertising revenue to larger rivals like Facebook Inc.
Twitter dropped to $64.98 at 9:42 a.m. in New York. The stock has more than doubled from an initial public offering price of $26 two months ago. The shares were cut to underweight, the equivalent of a sell rating, at Morgan Stanley, one of the banks that managed the company’s IPO.
The San Francisco-based company trades at a premium to peers such as Facebook and Google Inc., which have advantages in digital ad formats, wrote Scott Devitt, an analyst at Morgan Stanley, in a note.
Even with Twitter’s push to generate sales through television partnerships, TV ad budgets are most likely to go to Google’s YouTube and Facebook before Twitter, he wrote. Devitt has a price target of $33 on Twitter stock.
“As competition for online ad dollars intensifies, we guide investors to Google and Facebook, dominant platforms with more attractive risk/reward,” Devitt wrote. “In our view, success is far from guaranteed at this early stage.”
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