While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Twitter, Inc. (TWTR) plummeted 20% today after the microblogging service posted disappointing quarterly results and received a downgrade -- neutral to sell -- from UBS.
So what: Along with the downgrade, analyst Eric Sheridan lowered his price target to $42 (from $45), representing about 35% worth of downside to yesterday's close. While contrarians might be attracted to today's earnings-related 20% pullback, Sheridan thinks there's plenty of room to fall given the escalating concerns over Twitter's mainstream adoption rate.
Now what: According to UBS, Twitter's risk/reward trade-off continues to be unattractive. "Twitter remains one of the most expensive stocks in our universe -- an outperformance that we believe is unlikely to be sustained given questions raised by the earnings report," noted Sheridan. "A lack of mainstream adoption or a more simplified use case was a worry of ours coming out of the IPO & seems to have come to the fore faster than we had anticipate." Of course, with the stock now off more than 30% from its December highs, those worries might be providing patient Fools with a juicy long-term growth opportunity.
