While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Twitter, Inc. (NYSE:TWTR) slipped 2% this morning after Cantor Fitzgerald downgraded the microblogging giant from buy to hold.
So what: Along with the downgrade, analyst Youssef Squali reiterated his price target of $32, representing about 23% worth of downside to yesterday's close. Although Squali remains bullish on Twitter's growth prospects, he believes that the stock's 60% run-up since its IPO pricing leaves investors vulnerable to a near-term pullback.
Now what: According to Cantor, Facebook (NASDAQ:FB) is the more attractively priced social-media play. As Cantor notes:
While we remain fans of [Twitter] and believe the growth potential is real and significant, we find the current valuation excessive, discounting much of the short-term upside. We move to the sidelines until management begins showing proof of further upside to consensus estimates; we favor FB instead.
With Twitter trading at a clear price-to-sales and EV-to-EBITDA premium to Facebook, which is actually doing a better job right now of monetizing users, it's tough to disagree with Cantor's conclusions.
Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.