Twitter (TWTR) is up almost 1 percent to $42.95 in pre-market trading Thursday, after Cantor’s Youssef Squali upgraded the social network from “Sell” to “Hold”, maintaining his $45 price target.
Citing the recent pullback in the stock as well as the upcoming launch of new ad formats, the analyst said [via Streetinsider] that while the research firm still favors Facebook (FB) – its fiscal 2014 top pick – “[A] combination of 1) a positive read into 1Q:14 results, 2) the imminent launch of several new ad formats to drive monetization, and 3) a pullback in valuation make us less negative on the name. A large lock-up expiration in early May and a full valuation keep us from getting more constructive, however” .
In his note to investors Squali also noted that “given its ~100% annual revenue growth, Twitter remains positioned as an ideal play on continued secular growth in mobile and social ad spending, particularly as high-value brand ad dollars transition to the Internet.” he added
Shares of Twitter closed yesterday up 71 cents to $42.49. Despite the uptick the name has moved to the lower end of its 3-month declining channel. While Squali’s new PT suggests 6 percent upside, the stock’s P/E ratio is clearly problematic: nearly 194x on a forward T12-basis followed by a negative 381 P/E to growth ratio. In other words, even after a 25% pps decline, a new momo or position trader is paying a lot for great revenue growth but negligible earnings.