foodforthought's  Instablog

Send Message
Chartered Financial Analyst (NYC)
  • A Different Take On TWTR's Valuation! 2 comments
    Jan 4, 2014 1:19 PM | about stocks: TWTR

    From 424B4 dated 11/7/13:

    TWTR generated $112,247 of revenue in 4Q:12 ($316,933 (full year 2012) - 204,686 (9-months ended 2012). Hence, TWTR generated 35.42% of its revenue in 4Q:12. Applying this forward to 2013, we get 2013 revenue estimate of ~$654M. (9-months ended 2013 revenue divided by the reverse of the 35.42%: $422,215/(1-0.3542) = $654M)

    $654M implies a growth of ~107% in 2013. Being generous, let's assume TWTR doubles its revenue stream again in 2014 to ~$1.3B. And, let's assume again a generous 85% revenue growth in 2015 (for those asking why 85%; don't forget of law of large numbers). That will give us 2015 revenue estimate of ~$2.42B.

    Now is the tricky part. At the high end of estimates, FB will be growing its revenue base by ~40% in 2015. TWTR's 85% revenue growth estimate in 2015 is 2.125X (85/40) that of FB's. FB is currently trading at 8.5X its 2015 revenue estimate. Applying 2.125X to 8.5X, we get a "very generous and aggressive" 2015 P/S multiple of ~18X for TWTR.

    18X multiple applied on 2015 revenue estimate of ~$2.42B yields a market cap of ~$43.56B. Diluted O/S shares is ~704M shares (and will be much higher in 2014 and 2015!) That implies current share price of ~$62. Of course, we can always argue "10% premium" on top of our very aggressive growth assumptions due to "scarcity value" for TWTR shares (float is only ~80M shares). That would imply a current share price of $~68.

    So, who is willing to pay $68 for TWTR or more? If more, what are your assumptions?

    Stocks: TWTR
Back To foodforthought's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (2)
Track new comments
  • Thomas Almond
    , contributor
    Comments (326) | Send Message
    The only possible assumption you could make to buy TWTR now is if you think VERY BIG MONEY intends to manipulate the PPS higher by using the small float to force another short squeeze. It would have to be very very big money because retail will not pay this price to hold long and Day Traders and Swing Traders are sitting on the triggers with extremely tight stops. The major players behind this pump and dump are pulling a bait and switch. In other words they are slowly feeding their shares to Day and Swing Traders to unload their position. Once they are finished that $13 drop last week will look mild in comparison to what is coming. The lockup of insider and beneficial owner shares starts in February and ends in May. Hundreds of million of shares will get dumped and then the sellers will buy them back dirt cheap. By June of this year TWTR will likely be under $30 per share.


    I swear it is becoming increasingly difficult to tell the difference between shameless day/swing trade "Pump and Dumpers" and delusional TWTR investors suffering from "gold fever".


    No one in their right mind can honestly make a valid argument that TWTR is trading at this valuation because of some "down the road" potential given what we know about how this IPO was done with such a small float to make the stock easily manipulated. The steady stream of media hype to go with it tells you that some very influential forces were behind this pump and dump scam.


    The only type of person who would consider buying TWTR at the current price to hold long would have to be the type of person who would fall for one of those Nigerian e-mail scams.


    Everyone I know that is bullish about TWTR on StockTwits is glued to their trading platform all day every day making sure they are ready to pull the plug and dump the shares on a moments notice. Some of them began exiting Friday. Others are just day trading it. Playing TWTR as a Bull at this point is like playing musical chairs. The music is getting ready to stop and everyone following it closely knows it.


    All the CNBC analysts said Friday they would SELL after interviewing Topeka Capital's analyst Victor Anthony about Twitter's valuation. They are looking at earnings this month as a negative catalyst.


    The short squeeze seems to be over and that more than anything is what caused the rise.


    Friday the Volume was 32 million shares, but the tell was that the Gap up in the morning was caused by a paltry 800,000 shares in premarket. After that $70 was rejected three times. After 31 million shares traded it closed down from the open to $69. After hours it traded nearly flat on 215,000 shares. Most of those were being dumped at the ask. At least the largest 1000+ blocks were.


    Read this.


    Is it over? No one can say for sure. If it is not over it very soon will be. Best case scenario for bulls IMHO is it could keep running up until earnings. The Bears did beat the Bulls Friday Day. It was only the Premarket volume that saved the day for the Bulls. Premarket money is not smart money.


    I am of the opinion that we will see a correction post haste.
    4 Jan 2014, 03:44 PM Reply Like
  • foodforthought
    , contributor
    Comments (221) | Send Message
    Author’s reply » Interesting Google Trends: Twitter VS. Instagram


    4 Jan 2014, 11:23 PM Reply Like
Full index of posts »
Latest Followers


More »

Latest Comments

Most Commented
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.