The Lead: Twitter stock declines 13 percent after massive run-up
After more than two weeks of strong share-price gains that an analyst deemed "confounding," Twitter stock seemed to reach a correction stage Friday, with shares plunging 13 percent.
After Thursday's spike added to an already drastically elevated price that had short-sellers increasingly targeting the stock, Twitter declined $9.56 to $63.75 Friday, chopping about $5 billion off its previously skyrocketing market capitalization.
Twitter's recent Wall Street gains had already led to a back lash from equity analysts: S&P Capital IQ analyst Scott Kessler called them "frustrating," "confounding" and "excessive" in an interview with CNBC on Friday morning.
"It appears now that we've approached some kind of mania. When that happens, you just kind of have to wait and see what happens," the analyst said.
Twitter's big price move put the stock price more than 30 percent higher than the average analyst price target, a larger gap between analyst expectations and price than any stock in the broad-based Standard & Poor's 500 stock index, according to Bespoke Investment Group, which lists aluminum maker Alcoa, trading about 21 percent higher than the average price target, as tops in that category. The company also shared a graph showing Twitter's post-IPO rise in comparison with Google (GOOG).
"Now analysts have to decide whether they want to hold tight and keep their targets the same, or up their price targets to get them more in-line with where the stock is currently trading," the company's analysis read.
Friday morning, Macquarie equity analysts went with the first path, sticking to a $46 12-month price target and instead changing its grade of the company, from "Neutral" to "Underperform."
"We continue to believe that Twitter as a company has a bright future and many opportunities ahead. However, as a stock, we believe nothing has changed over the last 15 days to justify the rise in valuation," the analysts concluded.
Twitter's losses grew as the day went on, likely due to investors taking their winnings from the recent surge, like one small investor who spoke to The Wall Street Journal about his Twitter trades.
"I sold out completely. I made money on it and didn't want to take any more chances," Reuben Kressel, 66, told the Journal.
Despite Friday's decline, Twitter stock has still experienced massive gains of 145.2 percent since its November initial public offering and 53.4 percent in December. The Journal also pointed out that the interest in Twitter stock from ordinary Americans could signal a long-awaited sea change.
"In a name like Twitter, the retail investor is finally starting to come back," Wedbush Securities director of equity trading Ian Winer told the Journal. "For the first time in a long time, I've seen retail investors really starting to act differently."
SV150 market report: SV150 drops as Apple, social stocks decline
The holiday-shortened week ended with a whimper Friday, as all three indexes declined slightly, led by the tech-heavy Nasdaq. Silicon Valley stocks suffered more, declining 0.4 percent as Twitter's rivals and Apple struggled.
Apple dropped 0.7 percent to $560.09 after applying to ban Samsung products from entry to the United States in the companies' ongoing San Jose legal battle. The move comes after a federal appeals court ruled that Judge Lucy Koh had used a standard that was too strict in denying Apple's earlier request for an injunction against Samsung products, giving Apple another bite at the, uh, apple. If Apple is successful in its second attempt to ban the older products a jury found infringed the iPhone and iPad, it could ease the path to bans on newer models in a separate trial focused on Samsung's Galaxy S3 and more. "Because Samsung frequently brings new products to market, an injunction is important to providing Apple the relief it needs to combat any future infringement by Samsung through products not more than colorably different from those already found to infringe," the Cupertino company said in its filing.
Silicon Valley social-networking stocks struggled Friday, though not to the degree of Twitter: Facebook dropped 4 percent to $55.44 after a European study showed teenagers switching to other communication platforms, LinkedIn fell 1.9 percent to $216.35, Yelp declined 3.3 percent to $65.92, and Zynga dropped 3 percent to $3.95. Tesla Motors (TSLA) fell 2.8 percent to $151.12 after reportedly updating its software to help avoid fires such as one in Southern California earlier this month, and a study showed that the company's Model S owners are mostly male. On the other side, Cisco (CSCO) gained 1 percent to $22.02, Oracle (ORCL) gained 0.8 percent to $37.98, and eBay (EBAY) moved 0.2 percent higher to $54.18.
Up: Palo Alto Networks, Juniper, Cisco, NetApp, Oracle, Nvidia, Symantec, eBay, VMware, Google
The SV150 index of Silicon Valley's largest tech companies: Down 5.79, or 0.38 percent, to 1,499.12
The tech-heavy Nasdaq composite index: Down 10.59, or 0.25 percent, to 4,156.59
The blue chip Dow Jones industrial average: Down 1.47, or 0.01 percent, to 16,478.41
And the widely watched Standard & Poor's 500 index: Down 0.62, or 0.03 percent, to 1,841.4
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.