Twitter enjoyed a white-hot initial public offering Thursday, with shares closing 73% higher. But analysts were extremely quick to tamp down the euphoria. Several wondered why Twitter (TWTR) deserves to be worth about $24.4 billion.
"That valuation is simply far too high for a company that's losing money and seeing their rate of sales growth decrease," said Brian Hamilton, the chairman of financial analysis firm Sageworks.
Twitter revealed in its IPO paperwork that it has not turned a profit for at least the last three years, and losses accelerated in the first nine months of 2013.
But that didn't stop investors from sending Twitter sharply higher in its market debut. That worried Pivotal Research Group senior analyst Brian Wieser.
Less than one hour after Twitter began trading, Wieser downgraded his rating on the stock to "sell" from "buy."
"Twitter is simply too expensive" at any level above the low $30s per share, Wieser wrote in a note to clients. He has a $30 price target on the stock. Twitter closed at $44.90 on Thursday. The stock was down more than 3% in late morning trading Friday.
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