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Twitter's Underwriters Have Some Explaining to Do

Rick Munarriz
December 2, 2013

Now that Twitter's (NYSE: TWTR) been trading for a few weeks, we're starting to hear from the companies that helped take the social media darling public. All five of Twitter's lead underwriters are chiming in with their ratings and price targets.

They are refreshingly all over the map. After all, Goldman Sachs, Deutsche Bank, Morgan Stanley, J.P. Morgan, and Merrill Lynch may have taken Twitter at $26 just three weeks ago, but they're not all as giddy about it now that the stock is perched above $40.  

Let's go over where they are now before taking two of the underwriters to task.

Underwriter Rating Price
Goldman Sachs Buy $46
Deutsche Bank Buy  $50
Morgan Stanley Equal Weight n/a
J.P. Morgan Neutral $40
Merrill Lynch Underperform $36

Source: The Wall Street Journal

So now let's dig a little deeper into where Goldman Sachs and Deutsche Bank are resting with their bullish outlooks. Goldman Sachs sees long-term potential here. It envisions estimates being revised higher as Twitter cashes in on improving monetization of its growing traffic. That's fair.

Deutsche Bank is even more optimistic with a $50 price target. "Shares appear expensive," it warns, but it sees revenue growing to the point where Twitter's now fetching less than 15 times the market's top-line estimates two years out.

That's great, but why did you two take Twitter public at just $26 three weeks ago?

It's an honest question. Clearly two of the five lead underwriters can't establish the market on their own, but this is still an IPO tha