Twitter Inc’s share price could almost double in its first year as a listed company, a brokerage firm said, issuing a “buy” rating on the stock even before the online messaging service goes public.<\/p>\n
SunTrust Robinson Humphrey analyst Robert Peck, the first to rate the stock, suggested Twitter could float at $28-$30 per share, and said it could reach $50 within a year.<\/p>\n
Twitter allows its users to post a maximum of 140 character messages called “tweets” to share their personal thoughts and links to content with the public and their friends, or to promote businesses.<\/p>\n
“It is important for investors to look at Twitter beyond just a 140 character text,” Peck wrote in a 76-page note.<\/p>\n
Twitter’s planned IPO is one of the most anticipated since Facebook Inc’s coming-out party in June 2012. Despite posting big losses over the last three years, Twitter hopes to woo investors with its advertisement revenue growth.<\/p>\n
The company, which started selling advertising only in 2010, received about 87 percent of its revenue from advertising in the first half of the year.<\/p>\n
Twitter’s September acquisition of online mobile-ad exchange MoPub, which is viewed as its answer to Google Inc’s DoubleClick, and its advertising alliances with broadcasters would boost advertising revenue, the brokerage said.<\/p>\n
Peck said one of the biggest opportunities for Twitter was to capture a part of the $200 billion global TV market with Amplify, which allows broadcasters to show video clips and ads through tweets coordinated with what is being shown on TV.<\/p>\n
Twitter could make use of the search capability with a product similar to Google’s AdWords, where advertisers pay Google according to the number of clicks on the ads, the brokerage said.<\/p>\n
Keyword targeting, a feature which was only rolled out in April, will help the company’s revenue, Peck said. He is rated four stars out of a possible five for the accuracy of his recommendations on internet companies by Thomson Reuters StarMine.<\/p>\n
E-commerce and mobile apps are other areas Twitter could take advantage of to make revenue, Peck said. Three-quarters of its monthly active users are considered mobile users, Twitter said in a filing.<\/p>\n
Twitter has not said how many shares will be sold or at what price.<\/p>\n
Peck based his numbers on a float of 50 million shares, raising up to $1.5 billion, taking shares on issue to around 537 million.<\/p>\n
He then calculated his share target based on 16 times enterprise value divided by revenue or 80 times enterprise value divided by EBITDA (earnings before interest, taxes, depreciation and amortization).<\/p>\n
Twitter said in a filing there were 472.6 million shares of common stock outstanding and no shares of its preferred stock outstanding as of June 30.<\/p>\n
Peck said Twitter is the dominant player in the “real time interest graph”, which provides a unique option that few others can match.<\/p>\n
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