Tags: Pachter | Twitter | faith | value

Wedbush's Pachter: Twitter Trading on 'Leap of Faith'

Monday, 11 Nov 2013 07:59 AM

By Dan Weil

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The outlook for Twitter's future is rosy, but that doesn't necessarily justify the current share price, says Wedbush Securities analyst Michael Pachter.

The social media company carried an initial public offering (IPO) price of $26 Thursday. And even after dropping 7.2 percent Friday, it closed at $41.65, up 60 percent from the IPO level.

"I'm really optimistic about the potential for this company to grow into something much bigger than it is, but I don't know that it's going to happen," Pachter told CNBC.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

"It's trading right now on a lot of faith — a leap of faith — that it will double in size pretty quickly."

Pachter, has a "neutral" rating on Twitter shares and sees revenue rising quickly.

"We modeled it to double in size in about five years, and if it does that, I'm optimistically at about $37," he said. "If it doubles faster, then it's probably worth what it's trading at and maybe more."

Experts interviewed by Moneynews Thursday said Twitter's quick surge was overdone.

"This valuation is based more on animal spirits than on the business," says Robert Wiedemer, co-author of "Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown." The Twitter mania reflects the fact that the whole stock market is overvalued, he maintains.

"The idea that a company that hasn't made any money is worth $25 billion is a stretch."

Mick Heyman, an independent financial adviser in San Diego, said, "You're just buying these IPOs on a whim. I don't think there's any way to really value it."

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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Twitter Resists Frenzy to Avert Facebook IPO Flop Redux

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