The Highs and Lows of Twitter, Yelp – Are They Worth the Drama?
It’s an exceedingly complicated game when the analysts are torn over the predictions of a stock, and Twitter (TWTR) seems to be at the center of it all, with Yelp (YELP) eagerly bouncing on the sidelines.
With its debut in the stock market late last year, Twitter surpassed all expectations with its shares being bought 73% over its selling price. With this exceptional market profile, investors flocked to purchase the social media giant’s shares and were rewarded very well with stocks selling at $74.73 on Christmas.
However, this is when it turned south. Wells Fargo and Atlantic Equities figured it out before everyone when they decided to downgrade the company’s share in mid December. Though they missed out on the peak profit price that Twitter was generating on Christmas, it was Macquarie Research that knew just when to pull out without making it messy. They downgraded immediately after the peak price because their analysts argued that the high valuation that Twitter seemed to be generating was off, since they didn’t think the blue bird embossed company deserved that sort of a valuation.
Yelp’s earnings have seen a steady rise and a higher market price, with all of last week hovering in the high 60s. Investors see some inverse flashes of the Twitter situation in Yelp, since the market value is again not what was expected of the company ($15 billion). With pleasantly high earnings, Yelp was almost a safe and steady investment until it saw a drop from $71.66 to $65.40.
The previously high valuation for Twitter can only be justified in the future if it somehow grows its user base and expands the number of hours consumers spend on the site. Goldman Sachs Group, Inc and Deutsche Bank still say buy, but investors have only ended up with losses this year by listening to them in this regard.
Though the analysts who accurately called for a downgrade do not have much hope for the company’s long term future, Twitter has exceeded its revenue expectations and hopes to be seen doing well once the attention returns to its stock value instead of its user statistics.
It’s a risky investment, and so it’s better to play it safe and wait a month until it can be determined whether Twitter will find its footing amongst the major leagues or whether its high yielding stock was simply the fluke of beginner’s luck.
Yelp’s market profile hasn’t been as unstable as Twitter’s, though it has seen some heavy slumps during the past week (-8.4) and progressive with only minor dips in value. Investing in it is a much safer bet than the wild card Twitter has proven to be, yet the pragmatic option would be to steer clear of the technological stock market for the time being.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.