To be clear, Twitter doesn’t actually have any peers – the closest one is probably Facebook but even that is problematic from many angles.
But! It’s still worthwhile to get a sense of where Twitter’s IPO valuation will place it among the handful of social stocks that now exist. Here’s Bob Peck, SunTrust’s ace web analyst, on what Twitter looks like vs the group:
Cheap on peer valuation. The $14b implied market cap at the high end of the current range would indicate an Enterprise Value of ~$12b. This would imply only 10x and 6x EV/Revenue multiples for 2014 and 2015 respectively. This would be in contrast to the average of other similar fast growers like Facebook, LinkedIn, Yelp, and Zillow of ~17x current EV/Revenue multiples. We also note that our 3 yr revenue CAGR for Twitter is ~80% vs. the peer group’s average of ~45%. Further, Facebook and LinkedIn have an EV/MAU of ~$110 vs. Twitter’s $53. While Twitter currently monetizes its MAUs at a lesser rate, we think there is opportunity in narrowing the MAU monetization gap with Facebook ($2.19 ARPU for Twitter vs. $4.32 for Facebook in North America). Lastly, our $50 year end 2014 price target is predicated on a 17x forward revenue multiple, which derives a >$30b Enterprise Value.
Bob thinks the $17 to $20 range we’re hearing about is probably overly conservative and that we’ll probably see something closer to $24 (implying a $17 billion market cap) when all i said and done.
SunTrust Robinson Humphrey