On the morning that Twitter went public last month, it was clear that the stock would be in for a wild ride. Bankers went back and forth for more than an hour to set the opening trading price — by far the longest price discovery process in the history of the New York Stock Exchange — while reporters watched the numbers climb and climb from a gallery several feet away.
The estimated price range started at $40 to $44 and reached as high as $43 to $47 before Twitter's stock finally opened at $45.10 a share, an impressive 73% increase from its IPO price of $26 a share. The stock stayed relatively flat through November, but this month, it has exploded. This week, Twitter topped $70 a share for the first time, nearly tripling its IPO price from less than two months earlier.
See also: Twitter: What to Expect in 2014
Some positive headlines have helped drive up the stock price. Twitter expanded its ad targeting tools and introduced a specific tool for TV conversation targeting. Around the same time, Apple bought Topsy, a social media analytics company, for a reported $200 million, which some took to be a further validation of the social media space.
Even so, many analysts note that these factors alone do not justify the company's current valuation. Indeed, the reaction among some analysts in recent weeks could be described simply as: WTF?
"With a price that pushes into the high 30s and beyond, Twitter is simply too expensive," Brian Wieser, an analyst with Pivotal Research, wrote in an investor note on the day of Twitter's IPO, adding that Twitter had somehow achieved a valuation comparable to many well-established media organizations. "At a $45 price level ... the enterprise value is approximately $30bn ... or almost the same valuation as Discovery Communications, and nearly the same valuation as CBS or the combined Publicis Omnicom Group ... or even Yahoo..."
The following month, Twitter's stock soared again, prompting other analysts to raise a red flag even as they praised the company.
“We think all of these announcements are positive, but expected, and they don’t fully explain the recent stock run,” Robert Peck, an analyst at SunTrust, wrote in an investor note. “The company is still in a very nascent stage of its life cycle.”
Earlier this week, as Twitter's stock price jumped yet again and its market cap approached $40 billion, the analyst commentary seemed to get even more dire. Blake Harper, an analyst with Wunderlich Securities, wrote in a note Monday that Twitter's stock had "graduated to cult status."
“While the company is growing revenues faster than its fastest-growing peers and we do recognize the potential for the company to capture larger portions of the mobile and TV advertising market," Harper wrote, "it appears valuation metrics are irrelevant and that investors are betting aggressively on Twitter being the next great media-technology platform."
Perhaps the best analyst note of all, though, came on Thursday as one analyst tried to keep it short and to the point.
"We expect this to be among the shortest downgrade note you’ve ever read," Ben Schachter, an analyst with Macquarie, wrote. Twitter, he said, "has a bright future and many opportunities ahead. However, as a stock, we believe nothing has changed over the last 15 days to justify the rise in valuation."
It appears that note took some of the bite out of the stock, which dipped by 5% in early trading Friday, falling below $70 a share. As of publication, however, Twitter is still hovering around $70 a share with a market cap of just under $40 billion.
Image: Mashable/Christina Ascani