Twitter Inc. shares fell sharply Monday after a Morgan Stanley analyst lowered his investment rating on the social media's stock, saying that advertisers are more likely to spend their ad dollars on Twitter's larger rivals first.
THE SPARK: Analyst Scott Devitt downgraded Twitter's stock rating to "Underweight" from "Equal-Weight." An "Underweight" rating is on a similar level as a "Sell" rating.
THE BACKGROUND: Twitter shares have nearly tripled from their initial public offering price of $26 in November. Most of those gains were in the last month, after the San Francisco company rolled out a new targeted advertising program.
ANALYSIS: Devitt said that the success of Twitter's advertising platform is "far from guaranteed at this early stage."
Advertisers, who would normal buy ads on television, may spend their money on larger and more established online platforms first, Devitt said in a note to clients. Those competitors include Google Inc.'s video website YouTube and social media site Facebook Inc., he said.
Twitter did not immediately respond to a request for comment.
SHARE ACTION: Down $4.04, or almost 6 percent, to $64.96 in afternoon trading Monday. Its shares are down 13 percent from their recent high of $74.73 on Dec. 26.
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Original headline: Twitter shares fall on worries about ad revenue
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