Twitter Surges 8% to Spooky $69.96: Short Squeeze on Cult Stock, Says ...

Shares of Twitter ( TWTR) today closed up $5.42, or 8.4%, at $69.96, continuing a pattern of big daily percentage gains going back three weeks now following the shares' debut on November 7th.

The stock is now up 56% from that first day close of $44.90, and up 169% from its offer price of $26, something that causes a bit of consternation to bears such as Wunderlich Securities's Blake Harper, who today reiterated a Sell rating, and a $36 price target, writing that 'it appears valuation metrics are irrelevant and that investors are betting aggressively on Twitter being the next great media-technology platform.'

The price, he thinks, doesn't reflect the risks of competing with Google ( GOOG) and Facebook ( FB):

Many investors who are long and bullish on Twitter at these prices are betting on the company becoming a dominant media and technology platform that executes flawlessly and takes a larger share of the advertising market over the next 5+ years while competing intensely with Facebook, Google, and many others. While this is possible, we don't believe the current valuation justifies the risk, especially with the company having yet to report a quarter as a public company.

Instead, the stock, driven by new product announcements, such as the ' tailored audiences' advertising offering, has become a ' cult,' thinks Harper, and is also benefiting from an ongoing short squeeze amidst a tiny float:

The stock trades at objective measures that are hard to justify relative to peers and the next 2-3 years of expected results for the company. While we believe the valuation is excessive and would like to see the company report Q4 results, we acknowledge the stock may be influenced by the investor sentiment to own what they perceive as the next dominant media/tech platform and a limited float that may push the stock higher in the near term [...] As of 11/29/13, 17.8 million of TWTR shares were held short, which is 22% of the available float of 80 million shares. The float is only 11% of the total fully diluted outstanding shares, which we believe is creating a significant leveraging effect on the market value of the company. Public market investors are as a whole only able to access 11%, or 80 million shares, of the company, which means there is $5.2 billion of public investor capital supporting the $46 billion market cap.

Here's a table of the stock's daily surges since November 7th, courtesy of FactSet (click for larger image):