Twitter 'Hard To Buy At These Levels' Says Wunderlich Securities

Twitter, Inc. TWTR shares slipped in early Friday trading despite a positive earnings preview report from Wunderlich Securities, although the firm is cautious at the current valuation. 

Analyst Blake T. Harper noted that Twitter will report 3Q 2014 on Monday, October 27, and he expected the company to post revenues, EBITDA and EPS above his estimates and the consensus.

Harper estimated 3Q EPS at $0.03 and 4Q EPS at $0.07.  Full year revenue and EPS was estimated at $1.343 billion and $0.13, respectively.  

“We believe advertisers have continued to increase their spending on social platforms, including Twitter, and estimated advertising revenues should increase over the next several quarters,” according to Harper.

The report noted that the “business and financial model are gaining momentum, but [we] are more cautious on the shares, which are trading at 14.5x EV/S and 64x EV/EBITDA on our FY 15 estimate growing 61 percent Y/Y and 101 percent Y/Y, respectively.”

Despite adding users, launching a music partnership and new e-commerce initiative for the mobile app, the report concludes that while “expecting more strong results...[the] stock is hard to buy at these levels.” Harper “would be more inclined to recommend the shares at lower valuation levels or if new market opportunities accelerate.”

The firm maintained a Hold rating and $45 price target.

Twitter, Inc. recently traded at $49.80, up 0.26 percent.