Updated from 10:36 a.m. EST to include additional analyst comments in the third and fourth paragraphs.

NEW YORK (TheStreet) -- Twitter (TWTR) shares fell 4.6% to $56.29 in early Monday trading after Wells Fargo downgraded shares to "underperform" with a $36 to $39 price target, as investors may be underestimating some big risks associated with the company.

Wells Fargo analyst Peter Stabler downgraded shares based on several risks that may be overlooked, including "widely varying degrees of consumer engagement, discounting of engagement metrics/high costs, potential challenges to rapid adoption of TV related products, and amplification risk associated with marketer mis-steps using the platform."

SunTrust analyst Robert Peck also downgraded shares of Twitter, saying valuation is now "stretched," as the stock trades at exceptionally 2014 revenue and EBITDA multiples. "On consensus 2014 revenue and EBITDA estimates, it trades at 36x and 295x (34x and 235x based off of our estimates)," Peck wrote in the note. "On 2015 consensus, the company still trades at significant premiums, at 23x and 125x (over 20x and 113x our estimate)."

Peck rates Twitter "neutral" with a $50 price target.

Shares of Twitter have had a remarkable run in the most recent couple of weeks, following its initial public offering. Shares neared $60 last week, gapping up more than 30% as several analysts raised their price targets on the micro-blogging social network.

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Wells Fargo's Stabler noted that Twitter allows third parties to access its users data, including some highly lucrative partnerships with companies such as Bloomberg. However, given Twitter's relatively small user base, just over 240 million, compared to Facebook (FB), it's easier to see who has tweeted and who hasn't in the past 30 days. Stabler noted that roughly half of Twitter's monthly active users (MAUs) have not tweeted in the past 30 days.

There's the chance that Twitter's MAU user number doesn't accurately reflect the advertising opportunity, given the nature of so many users consuming content, and yet not actively tweeting. "We, ourselves, seldom tweet yet consume content on the platform on a daily basis," Stabler wrote in the note. "However, from an advertiser's perspective, we believe the number of active Tweeters is highly relevant due to the fact that we believe the "retweet" is the single most-valuable form of engagement currently offered by the Twitter platform, much like we believe a "share" is the most highly valued form of social action on the Facebook platform."

These types of users have value, "[b]ut it terms of user engagement, retweeters comprise a far more critical constituency, and conversations with marketers lead us to believe that advertisers will frequently prioritize some engagement actions over others when measuring the effectiveness of their programs," the analyst wrote.

Twitter has yet to post its first quarterly earnings report since going public in November. Analysts surveyed by Thomson Reuters expect Twitter to lose 2 cents a share on $216.27 million in revenue for the fourth quarter.

"While we acknowledge that many ardent Twitter users are readers and not Tweeters (ourselves included), we nonetheless consider the ratio a potential liability for the simple reason that the retweet is arguably the most valuable engagement metric in the eyes of many advertisers," Stabler wrote in the report. "If this relationship continues, we believe marketer ROI could suffer. Several agency and marketer contacts told us they already discount Twitter's engagement definition and that high prices could present challenges to increased spending."

San Francisco-based Twitter has been busy with acquisitions, recently acquiring MoPub and Bluefin Labs to help build out its advertising platforms, especially as it relates to television. Stabler notes the Bluefin acquisition, coupled with television's affinity for Twitter, "have yielded two innovative advertising products that we believe have been significant drivers of investor enthusiasm."

Television has really taken to Twitter, incorporating hashtags into shows, particularly those on CBS (CBS), which recently signed a deal with Twitter, as more people begin to use smartphones and tablets as a second screen for an interactive watching experience. While that may be "an intriguing opportunity," with 40% of Americans consuming more than two-thirds (71%) of primetime watching, the potential reach for Twitter on television could be limited, Stabler noted.

Though Stabler sees some risks not priced into Twitter's shares, he is still bullish on the longer term future of the company. "We view Twitter as a transformative social platform with opportunity to expand its audience scale, consumer value proposition and advertising utility," Stabler penned in his note. "Our view is tempered by what we believe to be a rich valuation, complexity of the Twitter platform and potential challenges to meeting high investor expectations."

--Written by Chris Ciaccia in New York

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