Goldman Sachs, a reputable investment banks, has boosted its share price target for Twitter (NYSE:TWTR). This move is now causing ripples in the market because many investors consider Goldman Sachs to be an authoritative institution whenever it comes to stock trading in America and beyond. The market is also jittery because of how much Goldman Sachs’ target price for Twitter has shot up.
More specifically, the share target price was at $46 but Goldman raised it to $65. This translates into a forty-one percent increase in Goldman’s initial target price. Investors are now questioning whether they should follow suit by raising their expectations and investing in Twitter to cash in on the possible gains that Goldman seems to be predicting. It is important to note that Twitter’s stock price went up by four percent to stand at $59 as soon as this news broke out.
The Connection between Twitter Revenues and Its Stock Price
Will this stock price maintain that upward momentum or will it remain as volatile as it has been over the last few months? This is a question that many investors are unlikely to have a straight answer to but Goldman Sachs seems to be optimistic. The key to understanding the dynamics of this stock lies in an evaluation of its revenue, both current revenue and potential revenue.
Twitter will make its first earnings report as a publicly listed company in February this year. Everyone is optimistic about the report but no one really knows for certain what the results will be. The social media giant had revenues of about $168.6 million during its third quarter in the 2013 financial year. Now, financial analysts predict revenues of over $216.53 million.
However, investors are not banking on Twitter’s current revenue flows but on its potential revenue flows. Remember, Twitter is not yet a profitable company. Meeting expectations will not satisfy investors. This means that Twitter’s revenue must perform better than expected to assure investors that their investment in the company is worthwhile.
Skepticism When It Comes to Twitter’s Share Price
Other market analysts such as Scott Devitt from Morgan Stanley feel as though the current hype surrounding Twitter stocks is not justified. In other words, the bubble might burst for many investors. Scott Devitt places a share price target of $33 on Twitter stocks. This is $32 less than Goldman Sachs’ share price target.
The current volatility in Twitter stocks is likely to remain until the company releases its first public earnings report. At times, the share price has been bouncing by as much as five percent on a daily basis. It seems as though the rich valuation by investors may pay off. This is because Twitter’s stock price and revenue s have been performing better than expected ever since its initial public offering. For instance, the company thought its Initial Public Offering would go for $17 but it went for $26. Soon after that, the share price shot up to $44.90 and now stands at $59. This means that Goldman Sachs share price target of $65 could in fact be accurate.