AP
He's maintaining his $50 price target, but says that since it is 20% ahead of that target, it's time to downgrade the stock.
In the last two weeks Twitter has increased by 40%. Peck has a list of reasons for the increase, but he doesn't think these reasons really justify the bump.
"More interestingly, the company's stock has run over 40% in the last 2 weeks on several announcements, but nothing truly significant or unexpected, including: Apple buying Topsy; roll out of Tailored Audience; direct messaging of photos; and MoPub native ads implementation. We think all of these announcements are positive, but expected and they don't fully explain the recent stock run."
He is still a believer in Twitter for the long run, but at today's price ~$59, he thinks the valuation is stretched:
"On consensus 2014 revenue and EBITDA estimates, it trades at 36x and 295x (34x and 235x based off of our estimates). On 2015 consensus, the company still trades at significant premiums, at 23x and 125x (over 20x and 113x our estimate). In comparison, the average of other industry fast growers is 8x 2015 Revenues and 24x 2015 EBITDA. EPS and FCF valuation multiples are non-meaningful given their nascent positive turn."
And, here's one more twist to that thinking. What it would take for the stock to justify investing today:
"For an investor to buy Twitter stock at current levels there are several assumptions that must be made. Assuming an investor requires the standard 20% annualized return that would imply a $101 stock price at the end of 2016. An investor would therefore need to be willing to pay 17x an aggressive $4b 2017 revenue estimate, or 11x an even higher $6.5b estimate, to justify this (vs. the industry multiple of 8x in 2015). While those estimates may be achievable, we don't feel comfortable being that aggressive yet off the current revenue base of ~ $630m."
Peck was the first analyst to issue a big bold buy call on Twitter. While Twitter was on its IPO roadshow, Peck put a $50 target on the stock.