Leading off our list is social media giant Twitter, which Goldman initiated with a sell rating last week.
Goldman analyst Eric Sheridan planted a price target of US$60 on the shares, almost exactly where they sit today.
Sheridan has a generally positive view of the entire U.S. internet sector, suggesting it still has plenty of room for long-term growth and operating efficiency improvement. But in the case of Twitter, the analyst thinks its valuation is stretched and that the company’s innovation is largely a “show me story.”
Specifically, Sheridan isn’t convinced Twitter will be able to appeal to a wider audience base long term or capitalize on the niche monetization opportunities its current audience base presents.
Sheridan says Twitter is more of a publishing platform than a social media platform like Facebook or Snap, which he both recommends as a buy. Twitter shares slumped as much as 5% last week in response to Sheridan’s view.
Next up is vacation rental leader Airbnb, which Sheridan also initiated with a sell rating last week. The analyst placed a price target of US$132 on the stock, representing about 20% worth of downside. Airbnb shares quickly fell 5% last week after Sheridan’s bearish call, but have largely recovered since.
Sheridan did say some good things about Airbnb, calling the company a market leader in the space with attractive growth and margin-expansion opportunities.
In fact, the analyst expects compound annual revenue growth of 21% over the next five years and an adjusted profit margin of 32% in 2026. So, for growth-oriented investors, Airbnb might be worth purchasing using just your spare change.
But at the current valuation, Sheridan thinks Airbnb’s risk/reward tradeoff tilts negative due to the volatile travel environment going forward, a mature end market and increasingly intense competition.
Go your own way
There you have it: two popular tech stocks that Goldman Sachs recommends you sell today.
Instead of volatile high-profile Internet stocks, risk-averse investors might want to stick with more stable, inflation-proof assets instead.
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