Twitter (TWTR - Analyst Report) , a hot stock since its IPO in early November, has seen terrible performances over the past few days. TWTR shares recovered slightly yesterday after Goldman reiterated its “Buy” rating and increased the price target to $65 per share, but they are still down more than 22 % from their record high of $74.73 reached on December 26.
The slump was brought about by a slew of bearish reports from several Wall Street analysts and the concerns over advertising revenues and valuation. Most of the analysts like Macquarie Equities Research, Morgan Stanley and Cantor Fitzgerald downgraded the stock to the equivalent of Sell rating. Additionally, many analysts lowered their price target for Twitter.
Per many analysts, Twitter appears to be over valued at current levels and thus, risk/reward is worth unattractive. Further, it appears that advertisers will spend more time and money on the established online platforms like Google (GOOG) and Facebook (FB) rather than Twitter (read: Ride the Facebook Surge with These ETFs).
According to the recent data from market research firm eMarketer, U.S. mobile advertising spending is expected to reach $9.6 billion in 2013, accounting for 22.5% of all digital advertisement investments.
Google will continue to dominate the U.S. mobile ad space with 41.5% market share, followed by Facebook at 16% share, and Yelp (YELP) and Pandora (P) at 3.9% each. Mobile advertising spending on Twitter is expected to be lower with just 3.2% market share in 2013.
The speculation would continue to result in volatile trading for Twitter until the company releases its fourth quarter financial results on February 5.
ETFs in Focus
The negative news flows and the tumbling TWTR share price spread jitters across ETF world as well. In particular, the funds having the largest allocation to this social media company might be in trouble if the current trend continues for some more time.
Below, we have highlighted two such ETFs that would remain in focus in the coming days (read: Is Twitter Owned by Your ETF?):
Global X Social Media Index ETF (SOCL)
This ETF offers the only pure play in the social media space by tracking the Solactive Social Media Index. The fund so far amassed $127.4 million in its asset base and sees volume of nearly 170,000 shares a day. The ETF charges 0.65% in fees and expenses.
In total, the fund holds 27 securities in its basket. Out of these, TWTR occupies the fifth spot with 5.26% of total assets. In terms of country exposure, U.S. firms take more than half of the portfolio, closely followed by China (26%) and Japan (8%).
The ETF was up 2.92% over the past week and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a ‘High’ risk outlook (read: Is the Social Media ETF Losing Its Luster?).
Renaissance IPO ETF (IPO)
This ETF follows the rules-based Renaissance IPO Index and provides exposure to the largest and most liquid newly listed U.S. initial public offerings. The fund has attracted $25.3 million in its asset base since its inception three months ago. Volume is moderate as it exchanges nearly 60,000 shares in hand per day, suggesting additional cost beyond the expense ratio of 0.60%.
Holding 59 stocks in the basket, Twitter takes the seventh spot with 3.17% allocation. From a sector look, technology and financial stocks dominate the fund’s portfolio at 29% and 21%, respectively, while oil & gas, consumer services and healthcare round off the top five. The ETF was up 0.41% over the past five days.
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