Twitter investors who took advice from Goldman Sachs and Deutsche Bank AG to buy shares in the social media company are likely kicking themselves after the stock fell as low as $37.24 this week.
The stock fell as low as $37.24 on April 30, 50 percent below its peak of $74.73 on December 26, eliminating almost $18 billion off Twitter's market capitalization, according to Reuters.
More accurate calls were made by places like Atlantic Equities, Maxquarie Research, and Wells Fargo, who advised clients to get out of the stock around when it peaked in December.
A number of analyst have doubts that the social media company can obtain as many users as its rival Facebook has, according to Reuters. At press time, Facebook has over 1.2 billion users.
"Can they become a mainstream company? That's the open question," said Ben Schachter, a Macquarie Securities analyst, according to Reuters.
Schachter downgraded Twitter's stock to "underperform" back on December 27, the day after it peaked, according to Reuters.
When Twitter debuted on the New York Stock Exchange on November 7, its shares rose 73 percent over the offering price. Over the next two months there was no let up, as stock reached fresh highs with "little or no news" to justify the valuation, according to Reuters.
This caused some analysts to worry.
In the middle of December, seven brokerages downgraded the stock within just three weeks.
SunTrust Robinson and Wells Fargo downgraded the company on December 16. Atlantic Equities and Macquarie weren't far behind, according to Reuters.
Wells Fargo analyst Peter Stabler said investors were "underestimating the challenges facing the company" in his downgrade note back on December 16.
There was a common theme among analyst, that the social media site was innovative, full of potential, and well-run, but did not deserve such rich valuation "so soon" according to Reuters.
"They are focusing on the right things. I only have positive things to say about the company. My quibble is with the stock," said Brian Wieser, Pivotal Research Group analyst, according to Reuters.
Twitter said back in 2010 it hoped to have 1 billion users one day, though it did not say when it hoped to reach its ambitious goal.
Much will depend on how Twitter plans on revamping its social media site to attract more users, according to Schachter.
"They are executing well in terms of innovation, but the user growth is a bit of a concern," he said, according to Reuters. "The hope is that they can change the site, to make it more user-friendly."
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